Update: Italian Prime Minister Matteo Renzi's Resignation; Consultations to Form a Government

           Center-left Prime Minister Matteo Renzi resigned, but his resignation was accepted by President Sergio Mattarella only after the 2017 budget was approved earlier this week, in order to minimize the effects of the crisis of the lack of a government. 

The outgoing premier resigned after the rejection of a constitutional referendum Sunday.  Mattarella, as head of state, concluded his consultations with all parliamentary groups today in an effort to give a mandate to someone to form a government, while Renzi remains as a caretaker. 

Renzi suggested two choices: a grand coalition government or early elections after the Constitutional Court rules on the election law in January.  Mattarella and the conservative party, which is the fourth largest in Parliament, first wanted the election law changed to prevent the populist party from gaining a majority if elections were called immediately.  The law was intended to allow the politically-divided Italian Republic to be more governable by providing a comfortable majority to the party that wins at least 37% of the vote by giving it a bonus number of parliamentary seats, but opponents of the law believe the bonus is too large to be representative of the popular will.

  The anti-establishment populist opposition party is about as popular as the center-left ruling party or perhaps slightly more, but Renzi, whose party is the largest in Parliament, had formed a majority government in coalition with small centrist and center-right parties.  The populists want elections as soon as possible, as does the far-right anti-immigrant party, which has the third most members in Parliament, ahead of the conservatives, as the two parties see an opportunity to gain a majority the sooner Italians go to the polls.  The junior partners of the ruling coalition favor a new coalition government with the center-left party led again by Renzi.    

Mattarella is expected to choose someone from the ruling party to form a government because it holds the most parliamentary seats and is, therefore, likeliest to be able to win the required vote of confidence for its executive. He could opt to give a limited mandate to someone only to fix the electoral law and then hold early elections. Parliamentary elections are next scheduled for 2018.  

Falls of governments in between scheduled elections because of a loss of parliamentary confidence have been frequent in Italy since the founding of the Italian Republic in 1946 and coalition governments are typical. It is not unusual for the same party to retain power with a new executive, as in the case of Renzi, who replaced Enrico Letta as Prime Minister in 2014, or even for the same premier to succeed himself with a new executive, which can even gain a larger parliamentary majority by adding to its coalition. 

Italy has the fourth largest economy in Europe and the third largest in the Eurozone, but its large public debt and the high load of bad loans held by Italian banks have been a cause of concern to the European Union.  The Italian Republic has adopted an austerity program of reducing spending, but has cut taxes and engaged in some stimulative spending, as well as made political reforms, to encourage economic growth.  The Italian economy is growing, but only weakly.  The European Union is assisting Italy because of the disproportionate Italian burden of the refugee crisis and because of the deadly earthquakes in central Italy this year.