President vows rapid moves to end Italy crisis

Italian President Sergio Mattarella indicated Saturday he would move swiftly to appoint a new government, saying the country had pressing issues to address following Prime Minister Matteo Renzi’s resignation.

In comments that came against the backdrop of a looming banking crisis, Mattarella said the country needed a “fully functioning government” and that he would decide his course of action “in the coming hours”.

It was unclear however if there would be any announcement before Sunday.

The statement followed three days of consultations with the country’s political parties that failed to produce any consensus on what to do following Renzi’s crushing defeat in a referendum on constitutional reform and subsequent resignation as prime minister.

Opposition parties rejected the idea of a government of national unity, leaving Mattarella apparently with little option but to ask Renzi’s Democratic Party (PD) to form a new administration.

In a carefully-worded statement open to different interpretations, the president did not rule out an early election but said that could only happen after the “necessary harmonisation” of the differing rules currently governing votes for the country’s two parliamentary chambers.

“Our country needs a fully functioning government quickly,” the head of state said.

“We are faced with engagements, commitments and deadlines that have to be dealt with and respected. These consist of domestic, European and international engagements and deadlines.”

The only specific issue Mattarella referred to was reconstruction following a wave of earthquakes between August and October.

But a politically toxic banking crisis will be the most pressing issue whoever succeeds Renzi as premier will have to deal with.

– ‘A failed government’ –

Renzi quit on Wednesday. On Friday, the European Central Bank decided to reject a request from Rome for more time to organise a private bailout for troubled lender Monte dei Paschi di Siena (BMPS), a move that makes a politically difficult government rescue inevitable, according to analysts.

Foreign Minister Paolo Gentiloni emerged as the pundits’ favourite to be handed the task. But speculation continued to swirl about the possibility of the outgoing prime minister being re-appointed.

Interior Minister Angelino Alfano, the leader of the PD’s junior coalition partner, the New Centre Right, said there was no need to rush to elections.

“The government is not like a yoghurt. It does not have a ‘best-before’ date,” he said.

But the populist Five Star movement, Italy’s biggest opposition force, said there should be immediate elections.

“Renzi and this government have failed. Nineteen million people voted no in the referendum … whatever new government there is will have no legitimacy,” said Giulia Grillo, the head of the movement’s group in the Senate.

– Renzi return opposed –

BMPS shares slumped more than 10 percent on Friday, taking this year’s slide in value to 85 percent. The bank’s board was holding crisis talks over the weekend.

Saving the world’s oldest bank will be politically painful. Most analysts see it and other Italian banks as needing radical restructuring involving inevitable redundancies.

And there are many small investors who have BMPS bonds who could see their savings slashed depending on the terms of the rescue deal.

Under EU rules, creditors have to accept some losses as a condition of state aid being approved.

Imposing losses at smaller banks last year hit Renzi’s standing hard and was linked to at least one suicide.

Italy’s biggest bank, UniCredit, meanwhile is planning a major capital-raising operation of its own which may have to be repriced, delayed or pulled as a result of the current uncertainty.

Among those who visited Mattarella on Saturday morning was Arturo Scotto, a lawmaker with the Left Ecology party (SEL), who warned that any attempt to reinstate Renzi would be greeted with fury.

“It would be a provocation to voters who not only rejected his reforms but also delivered a damning judgement on his social, political and environmental policies,” Scotto said.

Veteran Finance Minister Pier Carlo Padoan, Renzi ally Graziano Delrio, and former anti-mafia prosecutor Pietro Grasso, are also being touted as possible new premiers.