Update: Italy Forms a New Center-Left-Right Coalition Government

           Enrico Letta has formed a grand coalition that has been approved by Italian President Giorgio Napolitano to take over Italy’s technocratic government of Mario Monti.  

           Letta will be prime minister in a government that includes not only his center-left party, but also several ministers from the center-right People of Freedom Party (PDL) led by former Premier Silvio Berlusconi, as well as a few from the leading centrist party and some of the technocrats from Monti’s executive.  The Italian news agency ANSA reports that the conservative People of Freedom Party Secretary Angelino Alfano will be Vice Premier and Interior Secretary.  The PDL’s coalition partner, the Northern League, will not participate in the government.  The inclusion of the PDL in the new government of the Italian Republic represents a personal political comeback for Berlusconi.

            As I explained in my last post, the parliamentary elections over two months ago produced an inconclusive result as the center-left party won the most votes and a majority of the seats in the lower house, but failed to win a majority in the upper house because of a late surge in popular support for the center-right bloc.  The center-right’s main demand in its eight-point plan for its participation in the grand coalition was the repeal of the hated property tax and refund of the tax paid in 2012.  Berlusconi’s government had repealed the tax, but it was restored by Monti.  Letta shares the PDL’s priority of boosting Italy’s economic growth over continuing austerity measures initiated by Berlusconi and Monti’s governments.  Italy, which is eliminated its budget deficit, remains mired in its longest post-war recession.  Its weak economic growth threatens its ability to reduce its massive debt of well over a trillion dollars that represents 120% of its gross domestic product.  As the third-largest economy in the European Monetary Union, the formation of a government should reassure the financial markets, although there will be little confidence the left-right coalition can endure long beyond the approval its initial program of economic stimulus and electoral reform – if it can even be successful in passing them.