Italy's new PM Renzi faces first parliamentary test

Reuters , Monday 24 Feb 2014

In this picture made available by the Italian Presidency press office, Italian new Premier Matteo Renzi, left, shakes hands with Italian President Giorgio Napolitano after swearing in at the Quirinale Presidential Palace in Rome, Saturday, Feb. 22, 2014 (Photo: AP)

Italian Prime Minister Matteo Renzi faces his first test before a fractious national parliament on Monday when he goes to the Senate to put flesh on ambitious reform plans and seeks to win a confidence vote in his newly installed government.

Backed by his own centre-left Democratic Party (PD), the small centre-right NCD party, centrists and other miscellaneous groups, he should win the vote in the 320-seat upper house.

But there will be close attention to the size of his majority after some leftwingers in his own party initially threatened to vote against the government. If he fell much below the 173 secured by his predecessor Enrico Letta in December, his authority could be weakened from the start.

With the euro zone's third-largest economy in urgent need of potentially painful reforms and weighed down by a 2-trillion-euro public debt, Renzi's room for manoeuvre is limited and an uncertain parliamentary majority will not help.

The 39-year-old mayor of Florence, who won the leadership of the PD in December, forced his party rival Letta to resign as prime minister earlier this month after repeatedly attacking his government's reform record.

He took office on Saturday promising a radical increase in tempo, with an overhaul of the electoral and constitutional system to ensure more stable governments in future, tax and labour reforms and a shake-up of the bloated public administration, all within his first 100 days.

His chief of staff Graziano Delrio told RAI state television the government would cut taxes on non-wage labour costs, financing the reduction through spending cuts and privatisation revenues. But he ruled out a new wealth tax, which some opposition politicians suggested could be in the pipeline.

He also said that the government would respect the European Union's deficit ceiling of 3 percent of gross domestic product after comments from Renzi suggesting that he will seek room to breach the limits temporarily to finance structural investments.

However the first signs of tension in the coalition came after he said the government was considering raising taxes on financial earnings from investments like short-term treasury bills, known as BOTs, which are popular with many savers.

"Let's not get off on the wrong foot, announcing we could tax BOTs is wrong in terms of method and substance," Transport Minister Maurizio Lupi, from the NCD party, told the Corriere della Sera newspaper.


Economy Minister Pier Carlo Padoan, who was formally sworn in after missing the main ceremony on Saturday, will play the key role in implementing the reforms but he has not spoken publicly about tax plans, which will have to be managed carefully if more tensions are to be avoided.

Monday's Senate vote will be followed by a separate vote on Tuesday in the lower house, where the PD has a strong majority.

A leftist faction in the PD openly opposed to Renzi withdrew a threat to vote against the government but signs of dissent from within the party underlined how uncertain Renzi's control of parliament remains.

The two main opposition parties, Beppe Grillo's anti-establishment 5-Star Movement and former Prime Minister Silvio Berlusconi's centre-right Forza Italia, do not have the numbers on their own to topple the government but both have made it clear they want new elections.

For the moment, prospects of movement on that front have been held up by uncertainty over a deal reached by Renzi and Berlusconi to reform electoral rules blamed for hindering the creation of stable governments in Italy.

The deal, meant to favour large coalitions and reduce the role of small parties, now looks to be under threat following demands by Renzi's coalition partners to delay implementation pending a wider constitutional reform of the Senate.

That could take many months, if it is agreed at all, potentially smothering one of Renzi's main reform proposals before it gets off the ground.

The new government is being closely watched by its European partners, still wary of what happened in 2011 when financial market turmoil risked pushing Italy out of the euro zone.

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