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Will Italy have to go to snap elections?

Matteo Renzi’s resignation yesterday after the referendum defeat does not automatically trigger new elections writes Luigi  Scazzieri. Instead, the Italian president Sergio Mattarella will start consultations with party leaders to explore options to form a new government, based on the current composition of the parliament. Mattarella will probably give the mandate to form a new government to an experienced politician such as economics minister Pier Carlo Padoan or Senate President Pietro Grasso. 

There are three reasons not to call snap elections. First, there is a wide consensus in parliament that the electoral law for the lower house needs to be amended before new elections can take place. The law was passed under the assumption that the constitutional changes would be approved in yesterday’s referendum. Moreover, the electoral law is also under consideration by Italy’s constitutional court, and it is seen as inappropriate to vote before its verdict.

Second, mainstream parties have limited appetite for voting now because of the prospect of a strong showing by the populist 5 Star Movement, which could emerge as the largest party from snap elections. Many smaller parties even fear that they would be completely wiped out.

Third, after the lost referendum, the stock index of Italian banks is down 2 per cent, and Italy’s most troubled banks still need to be recapitalised, either by the market or with government funds. The last thing Italian banks need at the moment is another round of uncertainty caused by snap elections. Such high stakes should help convince Italy’s mainstream parties to form a new government.

Early elections are still possible, of course, if a new government cannot be formed. If they were held under the current electoral law, the upper house, the Senate, would be elected using a proportional system. In the Chamber of Deputies, the lower house, there would be two rounds of voting unless a party reaches 40 per cent in the first. Polls suggest neither the centre-left Democratic Party nor the 5 Star Movement would reach this threshold. There would then be a runoff between the two most voted parties, and the winner would gain a majority bonus in the lower house, leading to at least 54 per cent of the seats. In the Senate however, they would gain only a share of seats roughly corresponding to their share of the overall vote.

As a result, the winner of the lower house would have a majority of seats, but almost certainly would be unable to gain enough seats in the Senate to form a government alone. (Italian governments need to be approved by both houses.) If the Democratic Party were to emerge as the largest party, a coalition government would be likely. But if instead the 5 Star Movement won the lower house, the likeliest result would be a deadlock and yet another round of elections, as the Movement rejects coalitions.

Luigi  Scazzieri write this article for the Centre for European Reform (CER). This article was first published by the CER. More information can be found at www.cer.org.uk

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