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Prospect of Renzi govt given warm reception

From EU to financial markets, change in Italy viewed as positive

14 February, 20:18
Prospect of Renzi govt given warm reception (By Sandra Cordon) (ANSA) - Rome, February 14 - European leaders expressed interest Friday in the prospects of a new Italian government led by Democratic Party (PD) leader Matteo Renzi while financial markets cheered the prospects for change.

However, political opponents of the PD said the resignation of Enrico Letta as Italy's premier, clearing the way Renzi to take on the position, illustrated the problems with the current system of politics as usual.

Renzi effectively pulled the plug on Letta's cabinet when he requested the PD withdraw support at a party meeting Thursday so he could create a new executive to drag Italy out of the "quagmire". He is now tipped to get a mandate to form an executive from Napolitano and if Renzi takes the post he will, at 39, be the youngest premier in Italy's history and the country's third consecutive non-elected premier in two years. Analysts said investors seemed confident that Renzi will enact reforms to Europe's fourth-largest economy that could boost economic growth. "The markets seem to positively judge the potential new government...although it is premature to draw definitive conclusions," Citigroup said in a note.

Italy's premier financial market ended the trading day Friday sharply higher, with the FTSE Mib closing up 1.62% at 20,436 points, its highest level since July 2011 and one of the strongest gains among European exchanges on the day.

The spread between Italy's 10-year bond and its ultra-safe German counterpart also narrowed slightly during the day, closing at 200 basis points after ending the previous day at 204 basis points.

Yield on Italy's 10-year paper dipped slightly to close trading at 3.68%, down from 3.70% at Thursday's close.

The European Commission said it was confident of Italy's determination and ability to press on with fiscal-consolidation reforms under a new government as well as meet its obligations to Europe.

"We will continue to work with Italy in view of the six-month (duty presidency) of the EU," starting from July 1, said EC spokesperson Pia Ahrenkilde.

European Commission President José Manuel Barroso praised Renzi as a strong supporter of European integration.

"Renzi is a convinced European and is profoundly interested in pushing forward the European integration process," Barroso said.

In Berlin, a spokesman for German Chancellor Angela Merkel said she was following "with great attention" the political developments in Italy and hoped for a "quick" solution to the political situation. Not everyone was pleased with the changes.

The leader of Italy's anti-establishment 5-Star Movement (M5S) said it would boycott Napolitano's consultations and likened Renzi to infamous American gangster Al Capone, comparing his maneuvers to the Valentine's Day Massacre of 1929 in Chicago.

The foul-mouthed comedian-cum-politician Beppe Grillo claimed Renzi was a "good friend" of centre-right Forza Italia (FI) leader Silvio Berlusconi.

In an angry post on his popular blog, Grillo wrote that "the new boss is not Al Capone, but an unscrupulous careerist - a good friend of Berlusconi, (FI heavyweight fixer Denis) Verdini and people who would frighten Prohibition gangsters".

Grillo went on to compare Renzi's no-confidence move against Letta to the Valentine's Day massacre of 1929 in Chicago, when seven Irish mobsters were lined up against a wall and executed by gangsters led by Al Capone.

The head of the regionalist Northern League also said his group would boycott the president's consultations as well.

Among Italian voters, opinions were split, at least over Renzi's abilities to bring about change.

A voter survey published Friday by pollster Ixe for the RAI3 television program Agora found that nearly half of respondents, or 48%, expressed confidence that Renzi can implement significant reforms while 44% were skeptical. Splits were also seen among labour leaders, as CGIL union head Susanna Camusso said that Renzi must "put jobs at the top," of his agenda, while CISL leader Raffaele Bonanni called for a "drastic reduction in taxes and a clear reversal of the trend regard all the factors that block investments" that could lead to jobs.

The Vatican's official daily newspaper L'Osservatore Romano disapproved of the changes, on Friday describing the PD actions as "stale".

"What remains in the eyes of the Italian people and the observers from abroad is the umpteenth government crisis with reasons and rituals that taste stale," read an editorial.

"So with Renzi the moment has come in which the whole of Italy needs to turn a new leaf, after 20 years in which little of use has been achieved".

A blogger with Britain's leading business newspaper the Financial Times weighed in on the struggle between Letta and Renzi, suggesting that European Central Bank chief Mario Draghi may have inadvertently helped to prepare the way for Renzi to rise in popularity.

The article suggested that when Draghi announced in July 2012 that the ECB stood ready to do "whatever it takes" to support the euro, that gave wiggle room for Italy to delay necessary fiscal and economic reforms.

Those delays, in turn, paved the way for Renzi to boost his popularity by pledging that as premier, he would finally undertake the long-delayed reforms, concluded the newspaper.