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Published: Monday February 24, 2014 MYT 6:30:33 AM
Updated: Monday February 24, 2014 MYT 6:31:39 AM

Italy's new PM Renzi faces first parliamentary test

Newly appointed Italian Prime Minister Matteo Renzi attends his first cabinet meeting at Chigi Palace in Rome February 22, 2014. REUTERS/Tony Gentile

Newly appointed Italian Prime Minister Matteo Renzi attends his first cabinet meeting at Chigi Palace in Rome February 22, 2014. REUTERS/Tony Gentile

ROME (Reuters) - Italian Prime Minister Matteo Renzi faces his first test before a fractious national parliament when he goes before the Senate on Monday to put flesh on his ambitious reform plans and seek to win a confidence vote in his newly installed government.

Backed by his own centre-left Democratic Party (PD), the small centre-right NCD party, centrists and other miscellaneous groups, he should have enough support in the 320-seat upper house.

But there will be close attention to the size of his majority after some leftwingers in his own party threatened to vote against the government. If he falls significantly below the 173 secured by his predecessor Enrico Letta in December, his authority could be weakened from the start.

With the euro zone's third largest economy in urgent need of potentially painful reforms and weighed down by a 2-trillion-euro public debt, Renzi's room for manoeuvre is limited and an uncertain parliamentary majority will not help.

"If parliament is with us, good. Otherwise, Renzi is certainly not afraid of the ballot box," his chief of staff Graziano Delrio told RAI state television.

The 39-year-old mayor of Florence, who won the leadership of the PD in December, forced his party rival Letta to resign as prime minister earlier this month after repeatedly attacking his government's reform record.

He took office on Saturday promising a radical increase in tempo, with an overhaul of the electoral and constitutional system to ensure more stable governments in future, tax and labour reforms and a shake-up of the bloated public administration, all within his first 100 days.

Delrio said the government would cut taxes on non-wage labour costs, financing the reduction through spending cuts and privatisation revenues.

It may also raise taxes on financial earnings from investments like short-term treasury bills, which are popular with many savers.

But Delrio ruled out a new wealth tax, which some opposition politicians have suggested could be in the pipeline.

He also said that the government would respect the European Union's deficit ceiling of 3 percent of gross domestic product after comments from Renzi suggesting that he will seek room to breach the limits temporarily to finance structural investments.

PARTY DISSENT

Monday's Senate vote will be followed by a separate vote on Tuesday in the lower house, where the PD has a strong majority. But signs of dissent from within the party underlined how uncertain Renzi's control of parliament remains.

"If I could vote freely, without calling into question my relations with the Democratic Party, I'd vote 'No'," Pippo Civati, a leftwing Renzi critic who lost out to the new prime minister in last year's party leadership contest, told reporters.

The two main opposition parties, Beppe Grillo's anti-establishment 5-Star Movement and former Prime Minister Silvio Berlusconi's centre-right Forza Italia, do not have the numbers on their own to topple the government but both have made it clear they want new elections.

For the moment, prospects of movement on that front have been held up by uncertainty over a deal reached by Renzi and Berlusconi to reform electoral rules blamed for hindering the creation of stable governments in Italy.

The deal, meant to favour large coalitions and reduce the role of small parties, now looks to be under threat following demands by Renzi's coalition partners to delay implementation pending a wider constitutional reform of the Senate.

That could take many months, if it is agreed at all, potentially smothering one of Renzi's main reform proposals before it gets off the ground.

The new government is being closely watched by its European partners, still wary of what happened in 2011 when financial market turmoil risked pushing Italy out of the euro zone.

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