By Gavin Jones and James Mackenzie
ROME Feb 14 Italian centre-left leader Matteo
Renzi is one step away from forming a new government after he
swiftly eliminated party rival Enrico Letta as prime minister.
New numbers showing how slowly the economy is growing highlight
the huge challenge ahead.
After Renzi and the rest of the centre-left Democratic Party
(PD) leadership forced Letta's hand by withdrawing their support
at a special meeting on Thursday, the prime minister handed his
resignation to President Giorgio Napolitano.
Napolitano will hold two days of consultations leading to
the appointment of a successor. The 39-year-old Renzi, whose PD
is the biggest party in parliament, could be named premier as
soon as this weekend.
Renzi, who would be Italy's youngest-ever prime minister and
the third in succession to be appointed without winning an
election, faces intense pressure to achieve the structural
reforms that have eluded Italy for years.
Though he has long been agitating for sweeping change in
Italian politics and won a landslide victory for his party's
leadership in December, few had expected him to snatch power
from Letta so soon.
Renzi's decision to bring down the prime minister matured
over the past fortnight, according to people close to him, after
mounting pressure from Italy's business lobby which has
criticized the Letta government for not doing enough to help the
country's struggling corporate landscape.
"The change came after a rather abnormal piece of
pyrotechnics but I wouldn't waste too much time on the whys and
hows of it all. The problem is this: can he help get the country
moving again?" Carlo De Benedetti, one of Italy's most prominent
businessmen, said at an event in Turin.
"If he can, the way the change happened will be forgotten.
If he can't, that is all that will be remembered," he said.
Economic data on Friday underlined the scale of the
challenge Renzi faces in using his decisive, and at times
ruthless, political tactics to tackle the deep structural
problems that have made Italy one of the world's slowest growing
economies over the past two decades.
Statistics office ISTAT reported that the economy eked out
growth of 0.1 percent in the final quarter of last year, the
first rise in Italian gross domestic product since mid-2011.
The meagre scale of the increase underlines how far Italy
has fallen behind other European economies including France or
Spain, let alone the continent's champion, Germany.
Italian GDP was still down 0.8 percent from the fourth
quarter a year earlier, and over the whole of 2013 it contracted
by 1.9 percent after a 2.6 percent drop the year before.
Friday's numbers, which show how slowly Italy is emerging
from its deepest recession since War Two, are a reflection of a
Italy is still the third largest of the euro zone's 18
economies, but it is now smaller than it was a decade ago. Over
the past five years, its industrial output has fallen by 25
percent and in the southern half of the country less than half
of the working age population has a job.
It has a 2 trillion euro public debt and 12.7 percent
unemployment, a level not seen since the 1970s.
"I hope that a new and quicker reform drive could let Italy
join the recovery we are seeing now in the rest of Europe."
Business leaders have called for quicker reforms, with an
attack on stifling bureaucracy and a reduction of the heavy tax
burden on employers. Renzi has promised a radical programme.
Yet the manner in which he wrested power is likely to weigh
heavily on his government, politicians and business people say,
and could hamper his ability to overcome the resistance he will
inevitably encounter from entrenched lobbies.
Having made a name for himself as a "demolisher" of the
hidebound orthodoxies of Italian politics, Renzi now looks as if
he has gained office through the kind of backroom coup that
characterised the old days of the postwar Christian Democratic
For example, scores of amendments in parliament have already
held up the electoral law reform Renzi has proposed to ensure
there is no repeat of the unwieldy coalition Letta struggled to
lead. More problems await.
The PD leader will have to cut through the swathes of
political and societal resistance that have in the past thwarted
efforts to transform Italy. And as an outsider with little
knowledge of the corridors of power, he might find it even
harder than his predecessors.
Already Renzi's forces are likely to have to engage in a
period of horse-trading with the small New Centre Right party,
whose support the PD needs for its majority in parliament. The
party, run by Angelino Alfano, has called for a turn right and
has ruled out liberal social policies that Renzi has advocated,
including gay civil unions.
Italy's new would-be prime minister may also find that
European Union partners who appreciated Letta's adherence to the
bloc's strict budget rules are less impressed by his suggestion
that a promise of structural reforms should get Italy room to
loosen borrowing limits.
"The structural reform agenda will not go away and the
fiscal challenges will not go away," one senior EU official
said. "The room for manoeuvre for Italy given its debt level is