The Rendon Group Snapshot – 12 December 2016

by TRG Alerts Admin on December 19, 2016

The Rendon Group

(12DEC16)

Each week The Rendon Group’s media analysts will focus on a different continent and a different issue affecting that continent. As always, we remain available to answer any questions you may have and to provide additional information upon request. For more information regarding The Rendon Group’s products and services, please contact us at Alert@Rendon.com or +1-202-745-4900.

Paolo Gentiloni replaces Matteo Renzi as Prime Minister of Italy

renzi

Italian Prime Minister Matteo Renzi resigning from Parliament. (AFP)

This week’s snapshot focuses on the ongoing political turmoil in Italy. Following the referendum defeat for sweeping constitutional reforms on 04DEC, Italian Prime Minister Matteo Renzi announced his intention to resign from office. The proposed reforms would have strengthened the power of the central government at the expense of the Senate and were generally seen as an effort to stabilize the Italian political system. However, many Italians saw the vote as an opportunity to reject establishment politics in favor of populist parties such as the 5 Star Movement, which has been capitalizing public angst concerning economic stagnation, the migration crisis, and the European Union. Following consultations with Italy’s political parties, President Sergio Mattarella asked Foreign Minister Paolo Gentiloni to try to form a new government by 11DEC. Gentiloni accepted the offer, and if successful, will face a major economic crisis as soon as he enters office. The country’s banking system has been rocked by the turmoil, and the country’s third largest bank, Monte dei Paschi di Siena, likely needs state intervention to avoid collapse. All major political parties have called for new elections as soon as possible, but doing so would require a new election law approved by parliament.

News summary of events during the week of 05DEC16 – 12DEC16

  • 05DEC: According to final data released by the Interior Ministry, a total of 59.11 percent of Italians voted against the constitutional reforms, while 40.89 percent favored the reforms. (EFE)
  • 05DEC: After the referendum results were posted, a Treasury source said Economy Minister Pier Carlo Padoan would not attend meetings of European finance ministers on 05DEC and 06DEC. (Reuters)
  • 05DEC: Chairman of the Eurozone Finance Ministers Jeroen Dijsselbloem said that political instability in Italy makes life more difficult for both the country and the whole eurozone, but is not the start of a new eurozone crisis. (Reuters)
  • 05DEC: The White House said the US will continue to have close ties with Italy despite the failure of PM Renzi’s reform push that President Obama supported. (DPA)
  • 05DEC: President Mattarella thwarted PM Renzi’s plan to quickly resign by telling the government head to maintain his position until parliament resolves the nation’s budget for next year. (DPA)
  • 06DEC: Speaking after talks, a minister in PM Renzi’s outgoing government said Italy could have an election as early as FEB17. (Reuters)
  • 07DEC: PM Renzi announced he would resign at 1800 GMT. (AFP)
  • 07DEC: Italy’s third biggest bank, Monte dei Paschi di Siena, asked the European Central Bank for more time to wrap up a EUR5 billion (USD5.4 billion) rescue plan that was thrown into doubt by PN Renzi’s defeat. (Reuters)
  • 08DEC: The European Central Bank met to consider launching another round of monetary stimulus but the meeting was overshadowed by the threat of a political and national banking crisis. (DPA)
  • 08DEC: A leader of Italy’s 5-Star Movement pressed for a vote on whether the country should keep the euro as its official currency. (AP)
  • 08DEC: UniCredit said it agreed to sell off its holding in the Polish bank Pekao as Italy’s top lender scrambled to raise funds amid rising market uncertainty. (AFP)
  • 08DEC: President Mattarella  kicked off a round of consultations with parliamentary leaders to form a new government. (EFE)
  • 09DEC: The European Central Bank refused to give the world’s oldest bank more time to find major investors to back a EUR5 billion (USD5.4 billion) cash injection. (Guardian)
  • 10DEC: Representatives of Italy’s main parties — including the populist Five Star movement — headed to the presidential palace.  (AFP)
  • 11DEC: President Mattarella asked departing FM Gentiloni to form a new government. (WSJ)
  • 11DEC: Italy’s troubled Monte dei Paschi di Siena (BMPS) bank announced it would go ahead with plans to seek a private sector-led rescue. (AFP)
  • 12DEC:  Mr. Gentiloni unveiled his cabinet team ahead of an official swearing-in ceremony, keeping the line-up largely unchanged to ensure political stability in the eurozone’s third largest economy. (AFP)

Sample of Twitter handles tweeting about Italy’s referendum results and the ensuing political uncertainty.

  • @AlbertoNardelliAlberto Nardelli, Europe Editor, Buzzfeed UK
  • @allisonpearsonAllison Pearson, Columnist, Telegraph
  • @c_bakkianClaudio Baccianti, Economist, Centre for European Economic Research (Germany)
  • @GZampanoGiada Zampano, Rome Correspondent, Wall Street Journal
  • @JoyAnnReidJoy Reid, National Correspondent, MSNBC

Sample of Third Party Validators regarding Italy’s referendum results and the ensuing political uncertainty.

Adolfo Laurenti, Global Economist, J. Safra Sarasin

“While the reform has some intrinsic merits, the domestic debate is centered on the effort to unseat the prime minister. At the same time, financial markets see the vote as a test of the appetite of reform in the country.”

  • “Italy’s referendum explained: What you need to know”, CNBC, 02DEC16

Mujtaba Rahman, Managing Director for Europe, Eurasia Group

“If Renzi’s referendum fails, it will be seen as another symbolic victory for the populists that portends greater risk for other states and the EU. It will make the EU defensive and inward-looking, and more incapable of addressing the problems that are giving rise to the populists in the first place.”

  • “Europe holds its breath as Italy heads to the polls for critical referendum”, Telegraph, 04DEC16

Erik Jones, Professor of European Studies and International Political Economy, SAIS Europe (Italy)

“Market participants are already questioning whether the ECB will be able to contain the pressure on Italian bond yields. [But] If Italy struggles to cover its redemption requirements next February, confidence in the ECB as buyer of last resort could be badly shaken.”

  • “Europe holds its breath as Italy heads to the polls for critical referendum”, Telegraph, 04DEC16

Lorenzo Kihlgren Grandi, Lecturer, Sciences Po (France)

“These two elections are very important. Pro-E.U. movements have to find ways to fight for the idea of Europe, for its diversity, for what it stands for.”

Federico Santi, Analyst, Eurasia Group

“What we have seen lately is a constant focus on the EU and how it limits what Italy can do to handle the banking crisis, which is portrayed as having a negative impact on households.”

  • “Top official in Italy’s M5S increases call for referendum on euro”, The Guardian, 08DEC16

Sample of open source research conducted by TRG analysts related to Italy’s referendum results and the ensuing political uncertainty.

  1.  Italian PM Renzi resigns, president to consult with parties

Media: Reuters

Byline: Gavin Jones

Date: 07 December 2016

Rome, Dec 7 (EFE) – Italian Prime Minister Matteo Renzi resigned on Wednesday after a bruising referendum loss at the weekend, with most parliamentary factions pushing for an early election in a few months’ time.

The 41-year-old’s decision to quit after less than three years in office dealt a new blow to Western governments still in shock from Britain’s vote to leave the European Union and the election of outsider Donald Trump as U.S. president.

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  1. Italian president begins round of consultations to form new government

Media: EFE (Spain)

Byline: N/A

Date: 08 December 2016

Rome, Dec 8 (EFE) – Italy’s president is set to kick off on Thursday afternoon a round of consultations with parliamentary leaders to form a new government, following the resignation of Prime Minister Matteo Renzi.

The talks are scheduled to be held at the Quirinal Palace _ the head of state’s official residence _ where President Sergio Mattarella is set to meet with representatives of different parties starting at 5 pm GMT.

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  1. Italian populists renew anti-euro stance while eyeing power

Media: Associated Press

Byline: N/A

Date: 08 December 2016

ROME (AP) — A leader of Italy’s 5-Star Movement is pressing for a vote on whether the country should keep the euro as its official currency.

Alessandro Di Battista, one of the populist party’s several leaders, said in comments published Thursday in La Repubblica newspaper that “euro and Europe aren’t the same thing.”

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  1. Italian instability is not start of euro zone crisis: Eurogroup head

Media: Reuters

Byline: N/A

Date: 05 December 2016

BRUSSELS (Reuters) – Political instability in Italy makes life more difficult for Italy and the whole euro zone, but is not the start of new euro zone crisis, the chairman of euro zone finance ministers Jeroen Dijsselbloem said on Monday.

Italian Prime Minister Matteo Renzi said he would resign after his government lost a constitutional referendum last Sunday, throwing the country, which has bad loan problems in its banking sector, into political turmoil.

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  1.  President tells Italy’s Renzi to delay quitting until budget approved

Media: Deutsche Presse-Agentur (DPA)

Byline: Alvise Armellini

Date: 05 December 2016

Rome (dpa) – Italian President Sergio Mattarella thwarted Prime Minister Matteo Renzi’s plan to quickly resign on Monday by telling the government head to keep doing his job until parliament sorts out the nation’s budget for next year.

The move was seen as an attempt to reassure markets amid uncertainty about Italy’s political future. The budget law was approved by the lower house of parliament on November 28, but still needs Senate ratification, and local media said it could come by Friday.

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