Italian prime minister-designate Enrico Letta yesterday began tricky negotiations to form a new government and end a nearly two-month-old stalemate in the eurozone’s third-largest economy.
Letta, the deputy head of the badly fractured center-left Democratic Party (PD), was the surprise choice tapped by Italian President Giorgio Napolitano to head a broad-based coalition.
The government will include the PD’s traditional arch-rivals, former Italian prime minister Silvio Berlusconi’s People of Freedom party (PDL), as well as caretaker Italian Prime Minister Mario Monti’s centrist group, both of which have said they will support the government.
The bespectacled, balding Letta is an urbane moderate who speaks fluent English and at 46 would be one of Italy’s youngest prime ministers, representing a generational change from the era of Berlusconi, Monti and Giuliano Amato.
Berlusconi told an Italian television station it did not matter who headed the government as long as it enacted reforms.
“The important thing is that there is a government and that there is a parliament that can approve measures that we absolutely need to emerge from the crisis of recession and get back on the path of growth,” he said.
Letta began the consultations at parliament yesterday morning with smaller groupings, including the Left Ecology and Freedom party, which reiterated that it would remain in opposition.
The anti-establishment 5-Star Movement, the largest group in the lower house Chamber of Deputies, has also said it would sit in the opposition, but would support specific reforms.
Yesterday was expected to be dedicated to horse-trading over about 18 ministerial posts in the new government, expected to be made up of technocrats and politicians.
The economy ministry could go either to Fabrizio Saccomanni, the Bank of Italy’s director-general, or Carlo Padoan, chief economist at the Organisation for Economic Co-operation and Development, according to Italian media.
Angelino Alfano, the secretary of the PDL, has been tipped by some to become deputy prime minister, a choice that would placate Berlusconi, but upset some in the left wing of the PD .
The industry and labor ministries could go to politicians and the foreign affairs portfolio to Monti or former Italian prime minister Massimo D’Alema of the PD, local media said.
The PDL is pushing hard for a much-hated tax on primary residences to be abolished, which was a key plank in their campaign ahead of the inconclusive February elections, which gave the PD a majority in the lower house, but not in the Senate.
Letta hopes to form the government before markets open on Monday and seek confidence votes from both houses of parliament early next week.
The PDL and PD had previously failed to reach a deal, but Napolitano twisted their arms on Saturday when he was re-elected to an unprecedented second term and threatened to resign unless parties tried to find common ground to pull Italy out of its political rut and work on institutional reforms.
Rivalries between the parties as well as rifts within the PD, which fell short of a viable parliamentary majority in February’s vote, could still block an accord. However, formation of a government after such a long impasse would signal that Italy is finally ready to make a start on much-needed reforms.
Accepting his mandate on Wednesday, Letta said Italy faced an untenable situation and the government must provide answers on jobs, poverty and the crisis facing small businesses in a recession that now matches the longest since World War II.
He also said EU economic policies had been too focused on austerity, rather than growth.