Italy’s Conte Working on Deal to Keep Coalition Together

Italian Prime Minister Giuseppe Conte offered conciliatory words to an angry junior ally who is threatening a government crisis in the middle of a pandemic and an economic crisis.

Ex-Premier Matteo Renzi, leader of the Italy Alive party, will hold a news conference at 5:30 p.m. in Rome to announce whether his two ministers will resign after a long-simmering clash with Conte. Renzi’s party is tiny, but without his lawmakers Conte doesn’t have a parliamentary majority.

President Sergio Mattarella, who would oversee any attempt to forge a new government, stressed to Conte the need to put a quick end to the political uncertainty, according to a senior state official speaking on condition of anonymity.

After the interim meeting with Mattarella on Wednesday, Conte told reporters in Rome that the “the government can keep going only with the support of all the coalition forces.” He said he is working on a deal to avoid Renzi from stepping out and ensure the government lasts until the end of its term in 2023.

After sliding Tuesday, Italian bonds extended gains after Conte’s comments.

Italy’s Conte Working on Deal to Keep Coalition Together

The timing of the crisis could hardly be worse. Italy is battling a worsening coronavirus pandemic and a recession, and has taken over the presidency of the Group of 20 nations. A cabinet meeting scheduled for Wednesday at 8:30 p.m. is due to discuss new virus-related restrictions, while on Thursday Conte should sign off on a plan to widen the country’s deficit by about 24 billion euros ($29 billion).

If Renzi makes good on his threat, Conte could seek a parliamentary vote of confidence. But if he fails to win over enough centrist and unaffiliated lawmakers, Conte’s government would become a caretaker administration with limited powers to make policy decisions. If he resigns, however, he could be given a mandate by President Sergio Mattarella to try to forge a new alliance.

Other possible scenarios following a Renzi pullout include a similar coalition with a different premier, a broad alliance headed by a figure like ex-European Central Bank president Mario Draghi, or early elections. Surveys show the center-right opposition would likely win a new ballot.

Renzi has taken Conte to task over his plan for spending Italy’s estimated 196 billion-euro share of the European Union’s recovery package. The plan was approved early on Wednesday during a night-time cabinet meeting, Conte’s office said in a statement.

Italy’s Conte Working on Deal to Keep Coalition Together

The former premier has escalated pressure on Conte since late last year, slamming the prime minister’s plans for managing and spending EU funds. Renzi says the plan has been improved following his demands, but he’s insisting on further conditions, including that Italy tap a European Stability Mechanism credit line for health spending.

Renzi also wants Conte to share power with coalition parties, spend more on healthcare and give up control of the country’s secret services.

“We don’t want to be in government at all costs, if you want us to be in the government, listen to our ideas,” Renzi said in an interview with Rai state television Tuesday night.

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