Italian President Napolitano Asks Letta to Form a Government; A Center-Left/Center-Right Coalition to Be Sought

Newly-re-elected Italian President Giorgio Napolitano has asked Enrico Letta to form a new government to succeed technocrat Mario Monti as prime minister.  Letta, 46, of Milan, is the Deputy Secretary of the center-left party.  The center-left bloc of parties had won the most votes in the Italian parliamentary elections and seats in both houses of Parliament, but failed to win a majority in the upper chamber, the Senate, which has led to a hung parliament for two months. 

Letta had served in the Cabinet of the last center-left government.  His uncle had served as Deputy Secretary of the center-right party in its last government, under Silvio Berlusconi.  The Italian news agency ANSA reports that the younger Letta, who is known for his skills as a mediator, has good relations with the Secretary of the center-right party.  The center-right bloc of parties won the second most votes and seats in the Italian Parliament.  Berlusconi’s successful electoral campaign to deny the center-left a majority in the Senate is about to pay a political dividend: Letta is expected to try to form a grand coalition with Berlusconi’s center-right party to continue fiscal and economic reforms.  He will need his skills as a mediator to convince members of his own party who oppose a coalition with the center-right.  The previous leader of the center-left, who had failed in his effort to form a coalition with the third-place populists, resigned last week after failing to win confirmation for the candidates he backed for president, thereby throwing his party into turmoil.

Italy, which has the third-largest economy in the European Union, but one of the largest debt burdens in the world, has significantly reduced its budget deficit, which has decreased its borrowing costs sharply.  However, its economy is in recession, which casts doubt over its ability to eliminate the deficit and pay its debts.  Italy is regarded by the financial market as a firewall within the European Monetary Union against debt contagion.  The markets hailed the progress in breaking the Italian political deadlock, but fear a grand coalition – if it even can be formed – in fractious Italy might be short-lived.  One of the incoming government’s priorities will be a reform of the Italian Republic’s electoral laws.