Matteo Renzi Resigns As Democratic Party Leader

Update: Several hours after his spokesman denied reports that former Italian Prime Minister Matteo Renzi would step down as secretary of Italy's Democratic Party, the former Italian leader has publicly confirmed that his intention was indeed to resign after all.

 

 

Meanwhile, the center-left party has said it will not form a coalition with either Silvio Berlusconi's conservatives or the anti-establishment Five Star Movement - setting Italy up for months of discord as lawmakers struggle with a hung parliament.

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During Sunday's long-anticipated Italian parliamentary elections, anti-establishment and eurosceptic parties like the Five Star Movement and the Northern League stunned observers by bringing home larger-than-expected shares of the vote - an outcome that mirrored the results of recent votes in Germany and Austria, which also saw parties running on anti-immigration platforms record strong gains while established parties saw a meltdown.

While the final results have not yet arrived, Italy's ministry of the interior showed a center-right coalition led by former Prime Minister and media mogul Silvio Berlusconi bringing home 37% of the vote - a plurality - even as Berlusconi's past criminal convictions prevented him from running. Next in line was the Five-Star Movement, which netted about 31% of the vote, while the country's ruling center-left coalition came in third with 23% of the vote.

So it's hardly a surprise that Italian newswire Ansa reported Monday morning that former Prime Minister Matteo Renzi, who stepped down as Italy's prime minister in December 2016 after an embarrassing defeat in a referendum to change the Italian constitution, has decided to step down as secretary of the country's Democratic Party.

Renzi's press secretary swiftly denied the reports, but Italian media insist they're accurate. Analysts at JP Morgan Chase & Co. assessed before the announcement that Renzi would be widely expected to resign, leaving a power vacuum at the party that could see it shift further left.

Meanwhile, Barclays economist Fabio Fois pointed out that anti-establishment forces were "on fire", but that the chances that the various parties would be able to form a functioning government appeared incredibly slim. Fois expects "a wide and heterogeneous" coalition that will likely include anti-establishment parties. However, the coalition is unlikely to deliver "meaningful" structural reforms, and, depending on its composition, there are risks that previous reforms could be unraveled.

Italy

Other pundits argued that the pluralistic outcome was the "worst possible" for markets, and that the resulting hung parliament would only worsen the political dysfunction for which Italy is famous (a situation that Renzi tried to remedy with his referendum vote back in 2016, but which ultimately failed due to opposition from Five Star and other anti-establishment parties like the Lega Nord (Northern League) a conservative, eurosceptic and anti-immigrant party. Taken together, anti-establishment parties won more than 50% of the combined vote.

Renzi

Other analysts were slightly more sanguine: Goldman said it expects formal election results to be released later Monday morning. The current Democratic-led government will stay on as caretaker in the near term.

Even though the prospect of a caretaker government could diffuse tensions for now, the Italian vote suggests little appetite for economic policies that would keep the Italian fiscal deficit under the 3 percent Maastricht limit, for example.

Despite the denials, Italian newswire Ansa reported that Matteo's decision to resign was confirmed by "direct and authoritative sources from within the party." Ansa added that it's unclear who Renzi's successor might be.