Italy’s Napolitano Expected to Form Unity Government

The octogenarian president urges parties to take their responsibility.

Italy’s reelected president Giorgio Napolitano is likely to try to form a national unity government after left-wing leader Pier Luigi Bersani, whose Democratic Party has a majority in the lower chamber of parliament but not the Senate, failed to put together a coalition and nominate a candidate for the presidency that conservatives could accept.

Bersani resigned on Friday after the two man he had nominated to succeed Napolitano failed to win the necessary support in five rounds of voting. The parties subsequently appealed to Napolitano to agree to serve an unprecedented second term.

In his inaugural address to parliament two days after it elected him, the octogenarian former communist, who is not expected to serve out another full, seven year term, accused partly leaders of “irresponsibility” and threatened to resign if they failed to cooperate with him in forming a new government. He argued that Italy’s complex election system, which produced a divided parliament in February, had contributed to the crisis. The next government should therefore propose electoral reforms to avoid deadlock in the future.

Giuliano Amato, a former socialist prime minister, is thought to be Napolitano’s favorite to head a new administration that would drawn in technocrats and politicians from the main parties except the anti-establishment Five Star Movement which decried the presidential reelection as a “coup.” Enrico Letta, Bersani’s right hand, is another potential candidate premier.

The Five Star Movement’s leader Beppe Grillo, a former comedian who won more than 25 percent of the votes in the last election, pronounced the Italian republic dead on his blog on Friday, adding that his group was now “the only opposition” and offered “the only possibility of change.”

Opinion polls suggest, however, that not Grillo’s rather former prime minister Silvio Berlusconi’s party has benefited the most from recent weeks’ political turmoil which split Bersani’s party between leftists who backed the Five Star Movement’s presidential candidate and centrists like Florence mayor Matteo Renzi who advocated a grand coalition with the right. A recent SWG survey gave Berlusconi 32.4 support compared with 30 percent for the left.

Renzi may yet become the left’s prime ministerial candidate if there are new elections but without Bersani to block a coalition with the parties that support Berlusconi, chances of a national unity government being formed have increased.

Such a coalition should uphold Italy’s commitments to its European Union allies, Napolitano said on Tuesday.

The Mediterranean country that just over a year ago seemed to teeter on the brink of sovereign default has reduced its deficit and enacted market reforms but more than tax increases and a raise in the pension age are needed to put Italy’s economy on part with Northern Europe’s where patience is wearing thin.

Dutch, Finnish and German voters, who have born the brunt of European bailout efforts, are increasingly frustrated about the seemingly lackluster pace of economic modernization in the south. If Italy fails to make progress soon, it isn’t difficult to imagine the electorates in the more competitive north of the eurozone simply giving up on the whole project.

Labor market reforms drafted by Italy’s technocratic prime minister Mario Monti that would have made it easier for firms to hire and fire workers were initially delayed, then watered down under pressure from left-wing parties and their trade union allies.

Monti similarly backpedaled on proposed drugstore and taxi market reforms. Thousands more pharmacies were supposed to be added but union opposition forced the government into retreat. Efforts to lift professional restrictions on attorneys were halfhearted. Minimum tariffs imposed under Berlusconi’s administration were abolished but in order to compensate lawyers, a maximum was set on the number that can be employed in the industry, making it even harder for law graduates to start a business.

Retailers have been the only real beneficiaries of the incumbent government’s reforms. Legally mandated shop hours and sales periods have been abolished, if to the chagrin of small businesses who fear that they will not be able to compete with chain stores.

Italy’s public debt is still among the highest in the world at nearly 130 percent of gross domestic product. Labor costs also remain high. Whereas in other Mediterranean countries, they have fallen since the start of the sovereign debt crisis, in Italy, wages have continued to climb.