Italy Government Ministers Not Planning to Resign on Tuesday

(Bloomberg) -- A junior ally in Italian Prime Minister Giuseppe Conte’s coalition is putting on hold a threat to topple the government by withdrawing its ministers, officials said.

Ministers from the Italy Alive party of ex-premier Matteo Renzi will stick with the coalition at a cabinet meeting due at 9:30 p.m. Tuesday, after Conte and his main partners said they would not seek a new pact with him if he quits, according to the officials, who asked not to be named discussing confidential talks.

Italian bonds pared losses after the report, with 10-year yields up seven basis points to 0.63%.

Renzi’s threat of a break with Conte remains on the table, however. Tomorrow is another day and Italy Alive’s two ministers could quit from Wednesday onward, according to an official from the party. Renzi is planning a news conference Wednesday, Ansa news agency reported.

While the cabinet is expected to approve the latest plan for spending Italy’s share of the European Union’s recovery fund package, the root causes of the conflict remain. The ex-premier has called for sweeping changes to the government plan and for Conte to relinquish control of the country’s secret services and share more power with coalition allies.

“It is worth bearing in mind that the latest polls for an Italian general election indicate that Renzi’s party will only get about 2.8% of the vote,” Rabobank strategists including Richard McGuire wrote in a note. “There are a lot of vested interests in either forming a new coalition (perhaps with Renzi still in but with different ministerial seats) or keeping the current one going for longer.”

A Renzi move to pull his ministers from the coalition would come at the worst possible time for the country, which has been waging a battle against a worsening pandemic, a recession and spiraling national debt.

Italian President Sergio Mattarella, whose role includes oversight on any attempts to forge a new administration, last week asked Renzi to help ensure that parliament approves the recovery plan, according to officials.

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