* Negotiations with coalition partners likely to last days
* New government may be sworn in this week
* Lucrezia Reichlin seen as possible economy minister
By James Mackenzie
ROME, Feb 17 Italian centre-left leader Matteo
Renzi received a mandate on Monday to form a new government,
promising rapid tax, labour and institutional reforms to revive
a deeply troubled economy.
He needs to seal a formal coalition deal with the small
centre-right NCD party to secure a majority and name his
cabinet, but will probably seek a vote of confidence in
parliament later this week.
Renzi, who engineered the removal of a party rival from the
premiership last week, plans a radical programme to lift Italy
out of its most serious economic slump since World War Two.
However, he will have to deal with the same unwieldy coalition
which he criticised for failing to pass major reforms under its
"In this difficult situation, I will bring all the energy
and commitment I am capable of," he told reporters after
President Giorgio Napolitano gave him the mandate to form the
"The sense of urgency is extraordinarily delicate and
important but it's also true that, given the time horizon we
have set of a full parliamentary term, we'll need a few days
before formally accepting the mandate," he said.
The 39-year-old Renzi had been expected to take over since
his rival Enrico Letta was ousted as prime minister at a meeting
of their Democratic Party (PD) last week, following growing
impatience with the slow pace of economic reforms.
Renzi received the endorsement of former British Prime
Minister Tony Blair, the foreign politician with whom he is most
often compared, who said he had the "dynamism, creativity and
toughness to succeed".
However credit ratings agency Fitch underlined the scale of
the challenge, maintaining its negative outlook on Italy and
highlighting the risk of more political instability.
The euro zone's third-largest economy is technically no
longer in recession since it scraped back into growth in the
fourth quarter of 2013. However, it remains profoundly marked by
the crisis with a 2 trillion euro ($2.7 trillion) public debt, a
crumbling industrial base and millions out of work.
Renzi has promised swift action to create jobs, reduce taxes
and cut back the stifling bureaucracy weighing on employers and
business, but has offered few specific policy proposals and a
promised "Jobs Act" expected last month has been delayed.
He said he expected to lay out full reforms to Italy's
electoral law and political institutions by the end of February,
to be followed by labour reforms in March, an overhaul of the
public administration in April and a tax reform in May.
ECONOMY MINISTRY CHOICE EYED
With the formal steps leading to the formation of a new
government underway, attention has focused on Renzi's likely
choice as economy minister, a position vital to reassuring
Italy's international partners.
Speculation has concentrated on Lucrezia Reichlin, a
professor at the London School of Economics who is also in the
running to become deputy governor of the Bank of England.
If confirmed, her appointment would continue a series of
technocrat finance ministers following Bank of Italy official
Fabrizio Saccomanni, the incumbent, and his predecessor Vittorio
Grilli, a senior official from the Treasury.
Other possible candidates include Fabrizio Barca, a minister
in the technocrat government of Mario Monti which ran Italy from
2011 until last year, and Giampaolo Galli, a PD member of
parliament and former Bank of Italy economist with a background
in the business association Confindustria.
Renzi, who has dominated the political scene in Italy since
his sweeping victory in a PD leadership primary in December,
declined to comment on the possible makeup of his cabinet. "Our
attention is on content and not other issues," he told reporters
before returning to his home city of Florence, where he is
expected to resign from his current post as mayor.
One area which European Union partners will be watching
closely is budget policy, an area where Letta stuck to strict
Brussels orthodoxy, squeezing the deficit within the 3 percent
of GDP ceiling.
Renzi has said that Italy should be allowed to break the
borrowing limits in exchange for structural reforms to encourage
economic growth, an approach which could cause conflict with EU
partners including Germany.
The prime minister-designate received a boost from the
victory of the centre-left candidate in a regional election in
Sardinia on Sunday, who displaced a centre-right rival in the
first concrete test for the PD since Renzi took the leadership.
Financial markets, which nearly sent Italy crashing out of
the euro zone little more than two years ago, have reacted
favourably to his expected nomination with 10-year bond yields
falling to their lowest level in eight years on Monday.