Italy Passes New Electoral Law in Win for Premier Gentiloni

(Bloomberg) -- Italian Prime Minister Paolo Gentiloni managed to pass a controversial electoral law that sets the stage for general elections in the first half of 2018.

Gentiloni’s center-left government won a vote in the Senate on Thursday after a series of confidence ballots used by the government to push through the change. The bill, popularly known as Rosatellum, after Ettore Rosato, the parliamentary leader of Italy’s ruling Democratic Party, passed with 214 votes in favor and 61 against.

The law, which favors coalitions in elections, is supported by the Democratic Party, the right-wing Northern League, and former premier Silvio Berlusconi’s Forza Italia. The opposition Five Star Movement, which may be hurt by the new legislation as it has ruled out forming alliances, protested in the streets on Wednesday, saying the measure amounts to a “coup.” Other smaller left-wing groups also oppose the law.

The vote on Thursday strengthens the government ahead of the approval of the budget law by year-end, likely the last major piece of legislation to be passed before general elections.

"With the final approval, the pre-electoral campaign is now open,” said Marco Caciotto, a politics professor at the University of Turin. “Still, the political atmosphere is not ideal for the approval of the budget.”

Opinion Polls

Opinion polls show three contenders are virtually tied -- the Democrats, Five Star, and any possible center-right coalition including Forza Italia and the League.

Under the new law, coalitions will need to get 10 percent of the national vote to enter parliament. About two-thirds of the legislature’s seats will be distributed on a proportional basis and the rest on first-past-the-post ballots.

“We’ve seen Five Star and the Democratic Party vying to be the largest party in polls over the last month or so and I think investors are nervous about what Five Star in power would mean for Italy and the euro area,” said Cathal Kennedy, an economist at RBC Europe Ltd. in London.

Supporters of the law argue it harmonizes electoral systems for the lower house and the Senate, and makes it easier to form stable governments. Italy has had 64 governments since World War II. Skeptics say it won’t guarantee a clear governing mandate for any party, given current poll standings.

Even with the new law, “the most likely outcome of the next general elections will be a hung parliament in which none of the main parties or alliances controls an outright majority in either house,” Wolfango Piccoli, co-president of Teneo Intelligence, wrote in a note on Wednesday.

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