Will Italy Have Early Elections: A Preview Of Today's Constitutional Court Decision

On Wednesday at around 1pm CET, the Italian Constitutional Court will unveil its ruling on changes in Italy's electoral law, or Italicum, which was approved during Matteo Renzi’s tenure and changed the way the lower house is elected. The court began hearing challenges Tuesday to the law, the outcome of which could help determine when new elections are held. The 2015 law under review governs elections for the lower, 630-seat Chamber of Deputies. Among other things it assigns a bonus to the majority party if it reaches a 40 percent threshold.

It was adopted under the assumption that parliament's upper Senate chamber would be reformed. Italians, however, overwhelmingly rejected the proposed Senate reforms in a Dec. 4 referendum, leading to Matteo Renzi's resignation as premier.

Renzi's successor, Paolo Gentiloni, is running the government until new elections can be held. Most political forces agree that a new electoral law must be passed before any vote, taking into account the constitutional court's ruling, which is expected Wednesday.

With that in mind, here is what to watch for in tomorrow's decision. First, some background

  • Under the law, a majority of seats goes to the leading party that wins at least 40% of the vote in the first round, or wins the second round; party threshold is 3% nationally
  • Senate seats remained assigned via proportional representation and without a majority bonus
    • Senate kept different vote thresholds for party representation: 8% regionally for parties going solo, 3% within a coalition
  • Democratic Party (PD) head Matteo Renzi and his entourage are pushing for a vote in the first half of the year to exploit the party’s lead in some opinion polls
    • President Sergio Mattarella has called for both laws to be harmonized as “an indispensable condition” for new elections
  • Renzi’s PD and Silvio Berlusconi’s Forza Italia have signaled they’re awaiting a full ruling before starting talks
    • Berlusconi seeks more proportionality as Forza Italia polls less than 15% in opinion surveys and wants to keep door open for grand coalition with PD
    • Renzi favors majority bonus

Scenarios

Court strikes down second round of Italicum, keeps bonus for parties with at least 40% of votes

  • This is most likely scenario according to newspapers including Il Sole 24 Ore; election laws in lower house/Senate remain different; Renzi has more negotiating power in talks to make the two laws coherent; early elections still possible

Court rules both premium, second round unconstitutional

  • Senate/Chamber laws remain fully proportional; parties could just agree to harmonize party thresholds; early elections possible

If the court approves new Italicum law, Renzi wins but talks for election laws are more complicated, early elections will be more difficult

  • Current system could favor Five Star movement in one of the houses; any new system parties agree upon will be less friendly for Five Star, Rabobank said in Jan. 23 note

Source: Bloomberg