Italy’s political uncertainty near to an end, Credit Suisse

Six weeks after the elections, there is still no political clarity in Italy but economists at Credit Suisse expect the situation to accelerate towards some form of resolution soon.

“The coming days are indeed key for the formation of a government and for the credibility of the institutional framework in Italy. On April 18, the parliament will start voting on the new president of the Republic. This vote is important as it will provide a first real test on the intentions of the different parties,” the bank said in a research note.

If the center-left (PD) and the center-right (PDL) do find an agreement in the coming days then a president will be likely elected on the first day of the voting procedure. Such an agreement should also provide the base for an agreement on a coalition government of some sort – either a grand coalition or a center-left government with external “acceptance” from the center-right.

If an agreement is not found before April 18, it is likely that the new president will be voted by a different majority – most probably by center-left MPS and some, or all, of Grillo’s M5S members.

“It is worth recalling that the election of the Italian president is based on a qualified majority of 2/3 of the full parliament (Lower and Upper Houses combined) in the first three votes, but lowered to a simple majority from the 4th attempt. Given that the center-left has a large absolute majority in the Lower House and a relative one in the Senate, under the unified parliament the center-left only needs a few additional votes to reach a simple absolute majority,” economists added.

According to Credit Suisse, the latter scenario should be more disruptive and lead to a vehement opposition from the center-right – and likely to new elections sooner rather than later, we believe. It appears as the less likely outcome, as we write, but it is still worth having it in mind as we enter the delicate pre-vote phase.

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