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Published: Friday February 21, 2014 MYT 4:10:02 AM
Updated: Friday February 21, 2014 MYT 4:11:00 AM

Italy's Renzi says on track to form government

ROME (Reuters) - Italy's centre-left leader and impending prime minister said on Thursday he expected to have his new cabinet in place by the weekend, dismissing speculation that wrangling with his likely coalition partners was holding up an agreement.

"In a matter of hours, we'll have everything wrapped up," Matteo Renzi told reporters as he left the Rome headquarters of his centre-left Democratic Party.

Renzi has said he wants to name a cabinet by Saturday and go before parliament on Monday for a confidence vote. But progress has been held up by problems filling key posts, including the vital economy ministry portfolio.

The protracted talks underline the challenges facing Renzi, who admits he has taken a major risk by engineering the removal of former Prime Minister Enrico Letta. While the squabbling goes on, Italy's economy, the euro zone's third largest, remains stagnant. It grew just 0.1 percent in the fourth quarter - and that was the first growth since mid-2011.

Disagreement over the future role of Angelino Alfano, leader of the small, centre-right NCD party, which Renzi will depend on for a majority in parliament, appears to be one stumbling block. Political sources familiar with the discussions said Renzi was unwilling to for Alfano to remaining as deputy prime minister, the position he held under Letta.

"We've made progress," said NCD Senator Renato Schifani as the talks continued. "The next few hours will be decisive."

At 39, Renzi will be the youngest prime minister in Italy's history. But he will also be the third in succession gain the position without winning an electoral victory, after he went back on pledges not to seek power without a mandate from voters.

Letta lost the backing of his Democratic Party (PD) and resigned last week after growing pressure from PD leader Renzi over the slow pace of reform by his cross-party coalition.

Renzi has sketched an ambitious agenda, promising to tackle electoral and constitutional reform, make the labour market and tax systems more efficient and overhaul the bloated public administration all within four months.

However, he will have to deal with the same unwieldy alliance which he criticised from outside government, with opinion polls suggesting that many Italian voters disapprove of the manner in which he disposed of his party rival to claim office.

(Writing by James Mackenzie; Editing by Larry King)

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