(No) New Government in Italy

A week after Matteo Renzi resigned as Prime Minister following his defeat over the constitutional referendum, the former Foreign Minister Paolo Gentiloni was asked by the President of the Republic to form a new government that will guide Italy into the next elections in February 2018.

Since taking on his new role as Prime Minister, Gentiloni has faced criticism from opponents who consider his government a ‘photocopy’ of Renzi’s cabinet. In reaction to this, Gentiloni underlined that the government would continue the reform process led by Renzi, stressing the importance of “continuity”.

The challenges of the new Cabinet

Before Gentiloni’s appointment, all major parties called early elections, including the centre-right party Forza Italia and the Five Star Movement. However, before any vote can take place, it is necessary to approve a new electoral law to replace the one that came into force in 2016 (the so-called “Italicum”), and that applies only to the Chamber of Deputies and the lower house, because the Senate was set to be redesigned under the constitutional reform which failed last December.

The Italicum favours parties with a strong majority, which aims to limit fragmented coalitions. Currently, the first political parties to benefit from this kind of system are Renzi’s centre-left party (PD) and the Five Star Movement. Italicum could however, be deemed unconstitutional and on the 24th January, the Constitutional Court will decide on its legitimacy, as some parts of the law could be declared unconstitutional.

Labour market reform

Another challenge facing the new cabinet, is the referendum on labour market reform passed by Renzi’s cabinet between 2014 and 2015. According to the Labour Minister, this aims to “boost economic recovery, enhance competitiveness, strengthen social cohesion and improve public sector efficiency”.

In July 2016, one of the most important trade unions, ‘Italian General Confederation of Labour (CGIL)’, presented a petition to review Article 18 of the Workers’ Statute (changed by Renzi’s government), that now makes it easier for companies to hire and fire employees. On 11th January, the Constitutional Court said the proposed referendum on Article 18 was inadmissible, but gave the green light to two other questions flagged by the trade union. One of which focuses on getting rid of vouchers used to pay casual workers, and the other referred to contract responsibilities, which ensures that companies are responsible in the event of violations against workers. The popular vote on the remaining two questions is expected to happen between 15th April and 15th June 2017. The government said it wants to intervene on the voucher issue, and if it can approve a new law over the coming weeks, the referendum will be blocked.

Economic reform

Among other current challenges, Gentiloni has set out to reform the banking sector. In particular, in supporting banks in need, like Italy’s third largest and the world’s oldest bank, ‘Monte dei Paschi di Siena’ (MPS). In December, the new cabinet gave the green light to an MPS bailout of €20bn following the bank’s failure to raise €5bn from private investors. Watch this space, there is more to come!

What’s next?

Under the new government, no revolutionary changes are expected to come as Gentiloni is very loyal to Renzi, whose party has the majority in Parliament.

On many occasions, Gentiloni has said that his government will remain in place for the time necessary to introduce both institutional and economic reforms. The most likely scenario is that the government will pass a new electoral law applicable in both Houses, which means that there will be elections before 2018.

Words Andrea Bailo & Martina Lusi
Photos CC/Bruno

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