Italian PM faces severe challenges

Centre-left leader Matteo Renzi, expected to form Italy’s next government this week, must overhaul one of the eurozone’s most troubled economies without an electoral mandate and while awkwardly sharing power with a centre-right rival.

Enrico Letta resigned as prime minister on Friday after his Democratic Party (PD) forced him to make way for Renzi, 39, who is promising radical reforms to the eurozone’s third-biggest economy and a government than can survive until 2018.

President Giorgio Napolitano is likely to ask the slick-talking mayor of Florence, who became PD leader just two months ago and would be Italy’s youngest prime minister, to form a government today, a PD source told Reuters.

That would make Renzi the third premier in a row picked by the president and not by popular vote in a country where a long entrenched political elite resistant to reform has become widely unpopular over systemic corruption and mismanagement.

After getting a mandate from the president, Renzi will have to strike a deal with the small New Centre Right (NCD) party, whose support the PD needs to command a parliamentary majority. The party, which split from ex-premier Silvio Berlusconi last year, said it wants to see a written programme that puts a clear centre-right stamp on tax, jobs and family policies before backing Renzi.

Backroom horse-trading for key posts in Renzi’s cabinet by the NCD and other small allies is in full swing, Italian media said yesterday and, once completed, Renzi must swear in his team and seek confidence votes in both houses of parliament.

Then the government will take the helm of an economy that grew by a meager 0.1% in the fourth quarter of last year, the first sign of improving business activity seen since the country entered its worst post-war recession in mid-2011.

Until two weeks ago, Renzi had refused the idea of taking power without first winning an election. But his mood shifted when Italy’s main business lobby and its biggest labour union publicly abandoned Letta and called for more speed on reforms.

Renzi has pledged a “Jobs Act” with tax cuts for employers and a new contract scheme to promote hiring. He has said that EU deficit rules should not trump the need to revive growth, but the previous two unelected premiers had little luck in making the major reforms they had promised.