Renzi Wins Confidence Vote Despite Policy Uncertainties

The new prime minister wins a confidence vote, but there are questions about his economic program.

Late Monday night, Italy’s new prime minister, Matteo Renzi, cleared his first parliamentary hurdle by winning a confidence vote in the Senate.

The outgoing mayor of Florenco succeeds Enrico Letta, who resigned earlier this month under pressure from Renzi and his supporters in the Democratic Party.

The handover came with a partial cabinet reshuffle. Half the ministers are now women while Angelino Alfano, the leader of the junior center-right party, is no longer deputy prime minister.

Smaller majority

The Senate voted for the new government by a majority of thirty, a lower margin than the one Letta enjoyed.

Beppe Grillo’s Five Star Movement voted against Renzi, as did former prime minister Silvio Berlusconi’s Forza Italia.

The latter will still respect a deal to reform Italy’s electoral system, however. Berlusconi and Renzi agreed in January to reforms that should make it easier for larger parties to win majorities in both houses of parliament.

There was discontent inside the coalition as well.

Giuseppe Civati, a leftist who challenged Renzi in the Democratic primary last year, announced a strong internal opposition. Former deputy economy minister Stefano Fassina criticized the cabinet reshuffle and cautioned Renzi against deeper spending cuts.

Reform plans

The premier told senators he would immediately focus on lowering Italy’s labor costs by cutting payroll taxes. The aim is to reduce unemployment, which stood at 12.7 percent in December.

Estimates are vague, but, according to the party’s economic chief, the measure will be worth around €10 billion, much less than the expected 10-percent cut.

Other reforms could include universal subsidies for the recently unemployed and major investment in schools and infrastructure.

The whole package could easily exceed the planned reduction in public spending.

New economy minister

Details should come from the new economy minister, Pier Carlo Padoan, a former deputy secretary general of the OECD.

In his previous position, he was an advocate of austerity, as he told The Wall Street Journal last year. “Fiscal consolidation is producing results, the pain is producing results,” he said at the time.

Without a clear economic program from the new administration, though, it is difficult to tell if his views will clash with Renzi’s.

Other changes

A major change also occurred in the Ministry of Foreign Affairs, where Emma Bonino, the leader of the libertarian Italian Radicals, was replaced by Federica Mogherini, formerly in charge of European and foreign policy for the Democratic Party.

Other key posts were given to Federica Guidi, vice president of the Italian business association, and Giuliano Poletti, the head of the cooperatives federation.

Given the divergent political lines of their organizations, their appointments raise more uncertainty about Renzi’s long-term perspective.