Personal Wealth Management / Market Analysis

Italian Election Update—Coalition Talks Stall

Political progress is at a standstill in Italy as leaders have yet to reach a consensus on forming a coalition.

Pier Luigi Bersani, head of Italy’s center-left coalition and the narrow victor of February’s Parliamentary elections, appears to have failed in his effort to form a coalition government—likely requiring new elections this summer.

Beppe Grillo, leader of the anti-establishment Five Star Movement, declined to throw his party’s support behind Bersani (although the Movement’s Senate leader, Vito Crimi did express approval of Bersani’s coalition’s eight-point program of political and economic reforms). Earlier, Bersani rejected an offer from Silvio Berlusconi’s center-right coalition to form a grand coalition in which Bersani would be Prime Minister and members of Berlusconi’s party would become deputy PM and president. It seems Bersani felt the political price too steep.

The center-left leader is scheduled to meet President Giorgio Napolitano on Thursday, likely resulting in new talks with party leaders after the upcoming Easter holiday. Adding to political gridlock, Napolitano is unable to call new elections in the last six months of his term, which ends on May 15. However, Napolitano does have a few options for forming a government before his term expires:

  • Form another technocratic government until new elections can be called—likely in June or July.
  • Extend the mandate for former PM Mario Monti’s caretaker government until elections can be held.
  • Ask Bersani to step down as coalition head and have his deputy, Enrico Letta, step in and lead a coalition with Berlusconi’s party.

Bersani has indicated he’s against the formation of another technocratic government, and his passing the Prime Ministerial post to his deputy—who would then counter Bersani’s rejection and form the grand coalition with Berlusconi’s party—seems a stretch.

So it seems Italy’s political theatrics and time with no new government will continue awhile—not unprecedented in Europe. Belgium, for example, recently went 18 months without a government. While the drama could stoke occasional volatility, it seems unlikely to be a material game-changing event in Europe.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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