Renzi Seen Named Next Premier After Meeting President

Matteo Renzi was summoned to meet Italian President Giorgio Napolitano, a signal that the 39-year-old mayor of Florence may be designated as prime minister as soon as today.

The meeting will take place at the president’s office in Rome at 10:30 a.m., Napolitano said yesterday in a statement, without giving additional details. If Renzi gets the mandate, he will have to select a cabinet and then present his new government for confidence votes in both houses of parliament.

Renzi is seeking to become the youngest premier in post-World War II Italy. He positioned himself to take power by winning leadership of the Democratic Party in December and turning the group’s lawmakers against outgoing Prime Minister Enrico Letta last week. It’s up to Napolitano, 88, to designate a premier he believes can command majorities in both the Chamber of Deputies and the fragmented Senate.

“He will appoint Renzi very quickly,” said Francesco Galietti, founder of Rome-based research company Policy Sonar. “The only complexity left is whether he will get a thumbs up in the Senate.”

The next prime minister will face the same parliamentary instability that doomed three governments in little more than two years. While the Democratic Party, known as the PD, is the biggest group in Parliament, it controls only about a third of the seats in the Senate, or upper house. If he is asked to form a government, Renzi will have to come up with an agenda and an administration to bring rival parties into the fold, without alienating backbenchers in the PD.

Renzi has said he brought down Letta, also a member of the PD, because the 10-month-old government had stalled.

Bonds Gain

Markets have indicated support for the change. Italy’s 10-year bonds have rallied, sending the yield to the lowest in eight years. The yield fell 4.4 basis points to 3.64 percent at 8:52 a.m. in Rome.

Napolitano has the option of dissolving parliament and calling snap elections if he doesn’t believe a majority can be assembled. The legislature, installed after elections last February, has four more years in its term.

The search for allies will focus on Angelino Alfano, an ex-protege of former Prime Minister Silvio Berlusconi. Alfano, who served as deputy prime minister under Letta, has said he is open to throwing the 31 senators in his NCD party behind Renzi as long as he agrees with the program. Further support may come from senators allied with ex-Premier Mario Monti.

Berlusconi Trap

“I think this is a trap by Berlusconi and the NCD, and Renzi needs to be very, very careful,” Fabrizio Fiorini, who helps oversee $15 billion as chief investment officer at Aletti Gestielle SGR in Milan, said in an interview. “The NCD is a sort of Trojan horse for Berlusconi in Renzi’s camp. I think they will fire Renzi as soon as possible.”

The NCD was created in October when Alfano split from the party he helped Berlusconi run.

The Italian parliament has been marked by instability in recent years. The electoral law created by Berlusconi allows entrance to a multitude of parties, and their shifting alliances has held governments in check. Berlusconi, a three-time premier, lost his last majority in November 2011 and a year later took down his successor, Monti.

Letta, 47, survived a challenge by 77-year-old Berlusconi in October, thanks to Alfano’s support, only to be undone four months later by his own party.

Renzi rose to prominence in recent years ago as “the Demolition Man” because of his campaign to push established party officials into retirement. His image as an outsider appealed to voters scarred by recession, and he won further backing across the political spectrum for his willingness to challenge labor unions, his party’s traditional base of support.

In order to maintain a coalition, he will have to demonstrate an ability to compromise with the career politicians he has previously opposed.

Italy “has the worst group of leaders in all of Europe over the last 30 years,” Renzi said December 8 after winning leadership of the PD. They “use the word stability as a pretext for their own immobility.”

(Source: Bloomberg)