Italy Holds Local Vote as Chance of Snap National Election Fades

(Bloomberg) -- Italians will vote in the first round of municipal elections on Sunday in a test of the country’s political mood after a multi-party deal on a new electoral law unraveled this week, making the prospect of a snap national vote this year unlikely.

“It was our duty to try, but the game’s over,” former Prime Minister Matteo Renzi told daily Corriere della Sera in an interview published Saturday. “Now we have a horizon of almost a year before the election, let’s work for Italy.” The current legislature expires in 2018.

Investors rejoiced on June 8 as the possibility of Italian elections in the autumn -- potentially leading to either a hung parliament or a win of the anti-establishment Five Star Movement -- was reduced. A pact between Renzi, head of the Democratic Party, and Beppe Grillo’s Five Star Movement unexpectedly collapsed in parliament.

Speculation in the last month that Italy may have been headed toward elections as early as September had driven up bond yields and pushed down stocks. Investors had said that the potential agreement on an electoral law was a negative, given that a non market-friendly party could win in the vote. The Five Star Movement has called for a referendum on Italy’s euro membership.

Over nine million eligible voters will be asked to pick their mayors in cities from Genoa in the north to Palermo in Sicily, with the second round of voting scheduled June 25. “Local elections are always important as an indicator of trends,” Roberto D’Alimonte, political science professor at Rome’s Luiss University, said in a phone interview.

The ruling Democratic Party and the Five Star currently are neck-and-neck in national opinion polls, with each drawing about 30 percent support. That means smaller parties such as Silvio Berlusconi’s Forza Italia, leftist groups that broke away from Renzi’s Democratic Party and the anti-immigrant Northern League may play a role in the formation of the next government.

--With assistance from Alessandra Migliaccio and John Follain

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Alessandra Migliaccio, Dan Liefgreen