Italy's Governing Options Ebb as Di Maio Clashes With Renzi

(Bloomberg) -- Efforts to start government talks between Italy’s anti-establishment Five Star and the center-left Democratic Party were thrown into disarray as leaders of the two parties said dialogue was impossible, increasing the prospect of new elections in a few months.

Five Star head Luigi Di Maio signaled that discussions were no longer viable after Matteo Renzi, the Democrats’ former leader and ex-prime minister, said his party’s executive should reject talks at a meeting scheduled May 3.

“We did everything to form a government in the interest of Italians,” Di Maio said in a blog post late on Sunday, acknowledging that without Renzi’s backing Democratic lawmakers won’t be able to guarantee support for a Five Star-led government. The Democratic Party, known as the PD, rejected issues close to citizens’ interests “and they will pay for it,” he said.

The search for a new Italian government is at an impasse two months after a general election produced a hung parliament. With the political forces delicately balanced, the center-right received a boost on Monday as results of local elections in the northern region of Friuli-Venezia Giulia put its candidate ahead. That fillip followed another win in the southern region of Molise earlier this month.

Back in Rome, formal meetings with a mediator chosen by President Sergio Mattarella last week prompted Five Star and the PD to ask their members to decide whether to start talks on forming a government.

Di Maio had previously failed to reach a deal with the euro-skeptic League after its leader, Matteo Salvini, refused to abandon the right-wing alliance that won most seats in the March 4 elections.

Salvini’s decision appeared to be vindicated as early returns suggested that more than half of voters in the Friuli region of 1.2 million people bordering Austria and Slovenia backed the alliance’s candidate, Massimiliano Fedriga from the League, with more than 90 percent of ballots counted. The Five Star’s candidate was running third.

"The latest developments are slowly but surely pointing to new elections,” said Vincenzo Longo, an investment analyst at IG Markets in Milan. “This scenario would not have a strong negative impact on markets, provided that the timing will be short. A snap vote would be better received than a new vote next year."

The center-right may seek a mandate for Salvini to lead a minority government, newspaper La Stampa reported on Monday, without saying where it got the information.

With Five Star and the PD failing to reach a deal, Mattarella’s options include appealing to all parties to back a short-lived “president’s government” led by a technocrat, or triggering fresh elections in early summer or in the fall.

--With assistance from John Follain

To contact the reporters on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net, Chiara Albanese in Rome at calbanese10@bloomberg.net.

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Dan Liefgreen, Kevin Costelloe

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