ANALYSIS: PM Conte’s resignation, what next?

TODAY:

• PM Conte is scheduled to meet with his current cabinet at 08:00GMT/03:00EST today to, according to the cabinet office, and inform them of his intention to resign as PM. Subsequently, he will meet with President Mattarella and formally hand in his resignation.


• At which point Conte will hope to be provided with a mandate by Mattarella to attempt to form a stronger government that has a majority within both the House and Senate. However, such a mandate is not a certainty.

CONTE RECEIVES A MANDATE:

• At this point Conte will need to ensure that he has a majority in both the House and Senate, equating to 316 and 161 votes respectively. Note, the Senate features 315 elected members and 6 members for life.


• Thus far, Conte is set to retain the support of the Five Star Movement – 191 House seats and 91 Senate seats – and the backing of the PD (Democratic Party) – 92 House seats and 3 Senate seats. Additionally, Ansa reports that Conte retains the votes of LeU (Liberi Ugali) giving him a further 12 House and 6 Senate seats. This would provide him with the majority of the support of his existing coalition but notably excluding Renzi’s Italia Viva (30 House, 18 Senate) whose intentions are not currently known but given Renzi instigated the current crisis, his support is unlikely. Currently, the stance of the remaining members of the coalition is not currently known neither is the viewpoint of the members who are not part of the existing coalition but are seen as being supportive and equate to an additional 18 House and 15 Senate votes.


• From the opposition we have only heard from Salvini’s league thus far (130 House, 63 Senate) and UDC/Forza Italia (54 House, 91 Senate) who unsurprisingly oppose Conte as leader.


• Therefore, at this early stage, Conte would be short of the numbers required to form a majority coalition Government. However, it is still very early in this proceeding with Conte only set to formally resign today and as such he does have some time to bolster support; though, exactly how much time Mattarella will allow him is an unknown.


• In the scenario that Conte cannot form a new majority than Mattarella will likely ask Party leaders (excluding Conte, as he is an independent) to attempt to find a different solution.

NO MANDATE/MAJORITY:

• As above, if Conte cannot achieve a majority or in the event Mattarella does not present him with a mandate, party leaders will likely be asked to find a different solution. Such a solution could see the existing coalition largely reinstated without Conte at the helm, an option that would appeal to Renzi’s Viva as he has been opposed to the current PM’s approach to the pandemic and use of emergency powers.


• Alternatively, a technocratic or national unity government could be formed across all/broad party lines in order to ensure smooth passage of pandemic/recovery fund related measures. In this eventuality, the likes of former ECB President Draghi has been touted as a potential leader.


• Finally, and very much the last resort, snap elections could be called if no other solution bears fruit. Causing potentially substantial delays to the imposition of COVID-19 fiscal measures. While Conte is seen favourably among the Italian electorate due to his handling of the pandemic League’s Salvini has also benefitted during the period; therefore, the outcome of election proceedings would be uncertain at this point in time. Note, desks consider snap elections unlikely as President Mattarella is the only individual who can call for these and he continues to remain focused on ensuring the fastest possible resolution to recovery fund/COVID related legislation.

26 Jan 2021 - 08:31- Fixed IncomeEconomic Commentary- Source: Newsquawk