Friday / January 18.
HomeFT SelectRenzi delays resignation until after budget vote

Renzi delays resignation until after budget vote

Italy’s president has asked Matteo Renzi to stay on as Italy’s prime minister until the country’s budget law is passed in parliament, extending his stay at the helm of the Italian government for possibly a week.

At a meeting in the presidential palace in Rome, Mr Renzi expressed his intention to resign after suffering a bruising defeat in a constitutional reform referendum held on Sunday. But Sergio Mattarella, the Italian head of state, asked him to freeze the resignation until the budget is approved, according to a statement from Mr Mattarella’s office.

One Italian official said the budget could be approved within a week, after which Mr Mattarella would begin the formal talks on picking a new prime minister. The 2017 budget law has been passed in the lower chamber but not yet in the senate.

Mr Mattarella’s efforts to find senior politicians to steer Italy to the next election will come as financiers scramble to contain the financial aftershocks of the referendum, which has added to the banking sector’s problems in raising capital.

In a statement, Mr Mattarella urged political leaders to bring “serenity and mutual respect” to the political climate and hinted that stability was a key priority for him. “There are commitments and deadlines which the institutions need to respect, to guarantee answers consistent with the problems of the moment,” he added.

The two populist leaders with eyes on Mr Renzi’s job — Beppe Grillo, head of the Five Star Movement, and Matteo Salvini, leader of rightwing Lega Nord — have called for immediate elections, though Mr Mattarella is unlikely to go that route.

Angelino Alfano, the centre-right leader who is in coalition with Mr Renzi’s Democratic party, has been far more muted since the vote. The next general election is scheduled in 2018.

Instead of calling elections, Mr Mattarella is expected to choose a technocrat to take over as prime minister. Among the likely candidates are two senior figures in the country’s establishment: Pier Carlo Padoan, finance minister, and Pietro Grasso, president of the Italian senate.

Mr Renzi’s comprehensive defeat could also have consequences within his Democratic party that may complicate the transition process. There is increasing speculation that he may be forced to quit as leader of the centre-left party. Mauro Baragiola, a political analyst at Citi, said the party was at risk of splitting into pro- and anti-Renzi camps following the referendum.

In an indication of the seriousness of the vote to the financial sector — and to the eurozone as a whole — Italian bank shares fell sharply in Monday trading in Milan.

Banca Monte dei Paschi di Siena, Italy’s third-largest bank by assets, is battling to conclude an emergency €5bn recapitalisation to help it survive a mountain of bad debts and overcome years of poor management. JPMorgan and Mediobanca, the bank’s advisers, are intensively working with Mr Padoan to persuade Qatar’s Investment Authority to pump €1bn into MPS, people involved in the talks said.

Shares in UniCredit, Italy’s biggest bank, closed down an initial 3.4 per cent as investors fretted that the political crisis and any failure to recapitalise MPS would hit UniCredit’s plans to raise €12bn in new capital during the next few months.

Nicola Mai, head of European sovereign credit research at Pimco, said: “The referendum outcome makes the recapitalisation of Monte dei Paschi harder to achieve, with potential negative knock-on effects on the rest of the system and in particular on UniCredit’s equity raising plans.”

However, Italy’s creditworthiness did not appear to be immediately affected by the referendum — an important consideration, since the country has a debt to gross domestic product ratio of more than 135 per cent. Standard & Poor’s, which rates Italian debt at BBB, the lowest investment-grade rating, said the outcome did not have immediate budgetary or fiscal ramifications.

Via FT