Challenges and Traps for Italy’s New Renzi Government

Italian Parliament Building. On 22 February 2014, Matteo Renzi, former Mayor of Florence and the newly elected secretary of Italy’s Partito Democratico (PD, Democratic Party) was sworn in as the twenty-seventh Prime Minister of the Italian Republic under President Giorgio Napolitano. Renzi, who is thirty-nine years old, is the youngest prime minister (PM) in Italian history. His government also represents the lowest average ministerial age (47) and the highest proportion of women (50 percent) with some of them in important positions, such as Minister of Foreign Affairs Federica Mogherini and Minister of Defence Roberta Pinotti.

On one hand, public opinion favors Renzi’s informal profile, his leadership attitude, and the familiarity with which he uses social networks. However, Italian citizens are unsatisfied about the way in which his government took office. When elected leader of PD in December 2013, Renzi declared that he would have taken office as Prime Minister only after an electoral victory. However, on February 13 2014, the PD steering committee forced the incumbent prime minister, Enrico Letta, to resign and leave the floor to Renzi. Renzi justified this move as a response to Letta’s ineffective economic policies. However, Renzi’s government is now itself under the “sword of Damocles”—if the PM cannot achieve significant reforms soon, he could lose the support of his party in the next election cycle.

In pursuit of that end, Renzi’s government faces several challenges. According to Italian and foreign political analysts, the biggest constraint of the new government’s ambitions is a fragmented coalition in parliament lasting from Letta’s administration. In his inauguration day legislative speech, Renzi proposed an ambitious program of institutional, electoral, and economic reforms that would have both domestically and internationally relevant implications. However, will Renzi be able to push his proposed reforms with the same fragmented coalition that had supported Letta’s government?

The most difficult piece on Renzi’s agenda is the electoral reform that the Italian Parliament is currently discussing. The new law proposal consists of a party-list proportional representation system with a majority prize of 18 percent for the list achieving at least 37 percent of votes. This is the fragile result of a complex bargaining process between Renzi and Silvio Berlusconi, the former PM and the leader of Forza Italia (FI, Go Italy), the principal opposition party. This project of reform explicitly aims to increase the governability and the durability of the executive branch by favoring larger parties and creating a bipolar structure of competition, in which smaller parties line up behind the larger ones.

This bipolar structure is the reason why small partners of PD in the majority coalition, such as Nuovo Centro-Destra (NCD, New Centre-Right), want this proposal amended. They are concerned because according to the proposal, parties winning below 4.5 percent of the vote would not get into parliament. To pass the legislation as it currently stands could mean the untimely end of the Renzi’s government, since NCD, which is necessary to maintain a majority in the parliament, would leave the coalition. However, if a revised version of the electoral law is approved without the favorable votes of FI, the latter would not give necessary support to the institutional reforms proposed by Renzi, who needs a qualified parliamentary majority to amend the Constitution.

Renzi’s government is also focused on economic and job market reforms. The OECD estimates that, for the first time since 2010, Italian economy will grow in 2014 (0.6 percent) and in 2015 (1.4 percent). Renzi and his party hope to benefit from continued economic growth estimated for the next two years in their next election cycle. To that end, Renzi is pursuing measures such as reduction of job costs, suppressing the Italian regional production tax which iniquitously lies on firms, and reforming the job market (Job Act).

However, to achieve these reforms, Renzi needs to persuade the Italian public, his coalition partners, the trade unions (especially the Italian Labour General Confederation), and the European Union. The European Commission has kept Italy under observation especially because of its high public debt (around 127 percent of GDP, the second highest value in the Euro zone after Greek’s) and its low economic competitiveness. Italy must adopt reforms to revitalize the economy and reduce debt in the next few months without exceeding the boundary as imposed by the Stability and Growth Pact of 3 percent of the annual deficit-GDP ratio, which would induce the European Union to impose sanctions. A positive evaluation by the EU institutions is especially important given that Italy will have the presidency of the EU Council of Ministers in the second semester of 2014.

A final challenge to Renzi’s government is the upcoming European parliamentary elections in May. Public distrust toward EU institutions has highly increased in the last few years due to austerity measures imposed by the European Union, which makes it difficult for some countries to overcome financial crisis. Therefore, the next EU elections may see a good electoral performance by parties skeptical of the euro and opposed to austerity, such asMovimento 5 Stelle (M5S, 5 Stars Movement), which proposes a referendum on abandoning the Euro.

On the internal front, European elections have important implications for the Renzi’s government. Along with the municipal elections, these represent the first electoral test for the PD and the government under the leadership of Renzi. The M5S electoral campaign will likely focus on Italian issues and mark the difference between itself, which defends the interests of the “people” and the government, which represents the interests of the political and economic establishment. An electoral victory for M5S may represents a serious alarm bell for PD with a view to the next elections and may induce Renzi to change its policy agenda. This change could give a severe blow to the fragile stability of the broad left-right coalition that supports the government.

Alessandro Pellegata is currently a Research Fellow at the Department of Social and Political Sciences of the University of MilanHis research focuses on the evolution of the Italian legislative process. He is a member of the Centre for the Observation of Legislatures (COoL) and one of the co-founders and the principal manager of the Italian Law-Making Archive (ILMA).