Renzi ally Gentiloni named as Italy’s new PM

Paolo Gentiloni [European Council]

With a brewing banking crisis as a backdrop, Paolo Gentiloni was named Italy’s new prime minister on Sunday (11 December), filling a void left by close ally Matteo Renzi, who quit after a crushing referendum defeat.

Renzi’s softly-spoken foreign minister, Gentiloni, 62, was asked by President Sergio Mattarella to form a new centre-left government that will guide Italy to elections due by February 2018.

Renzi resigns, Italian president to consult with parties

Italian Prime Minister Matteo Renzi resigned yesterday (7 December) after a bruising referendum loss at the weekend, with most parliamentary factions pushing for an early election in a few months’ time.

Opposition parties demanded an immediate vote, claiming Renzi would continue to pull the strings from behind the scenes.

“Gentiloni is Renzi’s avatar,” said Luigi Di Maio, one of the leaders of the populist Five Star Movement.

Far right leaders Matteo Salvini and Georgia Meloni dismissed the new premier as, respectively, “a Renzi photocopy” and “a puppet”.

The silver-haired, grey-suited Gentiloni, a one-time student radical from an aristocratic family, will mark a distinct change in style from the ebullient, hyper-active Renzi.

He began consultations on his new cabinet Sunday and is hoping to have finalised his lineup by lunchtime Monday, before seeking parliamentary approval of his new government, probably on Wednesday (15 December), when an EU summit will be held.

In a brief statement after meeting Mattarella, he said there was an “urgent need for a fully functioning government” to address several pressing issues.

Chief among those is the fate of Italy’s third largest bank, Monte dei Paschi di Siena (BMPS), whose board was locked in crisis talks Sunday about whether to request a state-funded and politically complicated rescue package.

Bank of Italy head says wise to be ready for state aid for banks

Italy has asked for more time to sell four small savings banks it bailed out last year, the European Commission said on Friday (29 September), saying it was open to the request.

Mattarella turned to Gentiloni after opposition parties rebuffed overtures about a possible national unity government.

Renzi vows return

Renzi, who had been in power for two years and 10 months, resigned last week after voters overwhelmingly rejected a package of constitutional reforms in a referendum he had inadvertently turned into plebiscite on his own record.

Renzi resignation opens new era of uncertainty for Europe

Italian Prime Minister Matteo Renzi said he will resign after losing a key referendum on constitutional reform, plunging the country into political turmoil and the EU in further uncertainty.

In his first explicit confirmation that he plans to try and mount a comeback, he admitted on his Facebook page Sunday that he had found it a wrench to leave office.

“It was painful to pack the cartons yesterday evening, I’m not ashamed to say: I’m not a robot,” the 41-year-old wrote.

“Only those who try to change things can help a country as beautiful and difficult as Italy.”

Five Star, Italy’s biggest opposition party, and Salvini’s far smaller Northern League, are demanding a vote as early as possible.

But Mattarella, who enjoys extensive executive powers during government crises, has ruled that the current electoral laws must be revised first.

Theoretically, that could happen quickly but the process of harmonising the rules governing elections to the two houses of parliament, the Chamber of Deputies and the Senate, could also drag on for months.

Bank on the brink

As things stand, the lower house would be elected by a system under which the largest party is guaranteed a majority of seats while the Senate would be voted in under a proportional representation system.

Beware of Italy’s banking crisis

The looming banking crisis in Italy spells trouble not just for Europe’s fourth largest economy, but also for the EU and an already sputtering global economy, writes Jacob Shapiro for Geopolitical Futures .

Most observers agree that this is a recipe for chaos but the situation could be simplified at the end of January, when the constitutional court is due to rule on the legitimacy of the new winner-take-all system for the Chamber of Deputies.

Before then, Gentiloni will have to handle a long-feared banking crunch centred on the ailing BMPS.

The bank’s share price has fallen by 85% this year after another slide on Friday (9 December), when it emerged that the European Central Bank (ECB) is refusing to grant any more time for it to raise badly-needed new capital from private investors.

Analysts see a state-financed rescue as inevitable but, under EU rules, that can only happen if private investors also take a hit.

The issue is difficult politically with BMPS because of the large number of small investors who hold the bank’s junior bonds.

Imposing losses at smaller banks last year caused outrage in Italy and damaged Renzi’s standing.