Italy’s Conte Heads for Showdown With Junior Ally Ready to Quit

(Bloomberg) -- The government of Italian Prime Minister Giuseppe Conte teetered on the brink of collapse as a junior ally renewed a threat to abandon the coalition, jeopardizing the country’s attempt to counter the pandemic and salvage its economy.

Ex-Premier Matteo Renzi, leader of the Italy Alive party which is languishing at 3% in opinion polls, said his group will decide Wednesday whether to topple Conte’s government by withdrawing its ministers.

“We don’t want to be in government at all costs, if you want us to be in the government, listen to our ideas,” Renzi said in an interview with Rai state television Tuesday night. “Tomorrow morning we’ll decide and tomorrow afternoon we’ll give our decision in a press conference.” The press conference will be at 5:30 p.m., Ansa news agency reported.

A Renzi move to pull his ministers from the coalition would rob Conte of his parliamentary majority and come at the worst possible time for the country, which has been waging a battle against a worsening pandemic and a recession, while taking on the presidency of the Group of 20 nations.

Conte 3

Possible scenarios could now include a third Conte government, a similar coalition with a different premier, a broad alliance headed by a figure like ex-European Central Bank head Mario Draghi, or early elections. Surveys show the center-right opposition would likely win a new ballot.

Renzi has taken Conte to task over his plan for spending Italy’s estimated 196 billion-euro ($239 billion) share of the European Union’s recovery fund package, which is set to be discussed at the Tuesday night cabinet meeting.

Renzi says the plan has been improved following his demands, but he’s insisting on further conditions, including that Italy tap a European Stability Mechanism credit line for health spending.

“We will ask to introduce at least part of the ESM, if they say yes we will vote” for the recovery plan, “if they say no we will abstain,” Renzi said. ESM credit lines represent a red line for the Five Star Movement, the biggest force in the coalition.

Renzi has escalated pressure on Conte since late last year, slamming the premier’s plans for managing and spending recovery fund proceeds. The ex-premier has also made a series of demands including that Conte share power with coalition parties, agree to spend more on healthcare and give up control of the country’s secret services.

Renzi also said in the television interview that he believes Conte will on Wednesday unveil a group of lawmakers ready to support him.

Political Maneuvers

A new round of uncertainty and political maneuvering could hamper the government’s plans to impose tighter restrictions to curb the virus, which has infected more than 2 million in the country to date, and to push through measures to help businesses hit hardest by the pandemic.

The machinations will also likely stall a series of contested corporate moves including the sale of infrastructure giant Atlantia SpA’s stake in highway operator Autostrade per l’Italia SpA, the rescue of flagship airline Alitalia and the search for a buyer for bailed-out lender Banca Monte dei Paschi di Siena SpA.

Conte, a former law professor, could seek to obtain support in parliament -- though he would face a tough vote in the Senate -- or attempt to carve out a new administration. Conte was plucked from obscurity in 2018 to head a government with Five Star and the anti-migrant League. He forged a second coalition with Five Star and the Democratic Party the following year, after League leader Matteo Salvini ditched the alliance.