Research: Renzi's Planned Political Comeback at PD
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Investment Research — General Market Conditions 28 April 2017 Research Italy Renzi’s planned political comeback at PD leadership contest On 30 April, Italy's ruling Democratic Party (PD) will hold its leadership contest between former Prime Minister Matteo Renzi, Michele Emiliano, Governor of Apulia and the current Chart 1: Renzi remains favourite to Minister of Justice, Andrea Orlando. Should no candidate secure more than 50% of the vote, a win party leadership, according to run-off between the top two candidates will take place in the national assembly of the party polls within two weeks and the winner proclaimed on 7 May. After Renzi stepped down as party Renzi Emiliano Orlando leader in February and triggered a leadership contest in the hope of silencing internal party 80 % feuds, his chances of reasserting control of the party ahead of the parliamentary elections look 70 60 good, according to the polls (Chart 1). A win by Emiliano would be the biggest risk scenario 50 from a financial market perspective, as he wants to build a left-wing alliance and cooperate 40 with the Five Star Movement (M5S). However, currently he polls as a distant third, at 13%. 30 20 The anti-establishment M5S, which is critical of the euro, is currently leading in the 10 0 parliamentary election polls with 29.5% compared to 26.8% for the PD, as internal 22–24 7–8 Mar12 Mar 15 Mar31 Mar– 12 Apr Feb 2 Apr divisions, with a left-wing faction breaking away and forming a new party (Democratic and Progressive Movement - MDP), have weakened the PD’s support (see Chart 2). Although Source: Wikipedia, Danske Bank Markets parliament is scheduled to carry on until March 2018, Renzi and a number of political leaders from the Northern League and M5S have pressed for early elections. Chart 3: M5S, centre-right and centre- A general election before the current electoral law (‘Italicum’) is revised is highly left coalitions still fall short of 40% unlikely, as President Mattarella has indicated that he will only dissolve parliament once the threshold (Poll from 23 April) voting systems for the upper and lower house (Senate and Chamber of Deputies) are aligned, to avoid political gridlock. Currently, the Gentiloni government is still working on drawing up a new electoral law with some form of proportional representation that might reward a M5S 29.5 stable majority to any party or coalition winning 40% of the vote. Although M5S so far has ruled out forming any coalitions with other parties, the traditional centre-right and centre- left alliances currently also fall short of the 40% threshold, leaving a high degree of Centre-right (Forza Italia, 30.4 uncertainty about who will head any future government (see Chart 3). Brothers of Italy & Lega Nord) In our view, a general election before late September 2017 seems improbable for now as the current government is still working on revising the Italicum, and current deputies would Centre-left (PD, 33.8 forfeit eligibility to generous pensions. However, should a compromise on a draft electoral law Popular Alternative & MDP) only be reached sometime in H2 17, it is likely that the current government will try and serve until the end of its term in March 2018. % 0 10 20 30 40 Source: EMG, Danske Bank Markets Chart 2: M5S has overtaken PD in the parliamentary election polls 35 % 35 30 30 25 25 20 20 15 15 10 10 5 5 M5S Forza Italia Lega Nord PD 0 0 5–6 14 Dec 10–11 25–26 1–3 15 Feb 22–24 6–8 17–19 29 Mar 5–7 13–14 First Year Analyst Dec Jan Jan Feb Feb Mar Mar Apr Apr Aila Mihr Source: Various pollsters, including EMG, ScenariPolitici, Ixè, Ipsos, SWG, Index, IPR, Danske Bank Markets +45 45 12 85 35 [email protected] Important disclosures and certifications are contained from page 3 of this report. www.danskeresearch.com ItalyResearch Research Italy When could parliamentary elections in Italy take place? 30 April 30 April 2017 PD leadership contest Orlando becomes Renzi becomes Emiliano becomes 7 May 2017 PD party leader PD party leader PD party leader Current PD government works on revising electoral law ‘Italicum’ New electoral law drawn up in Q2 17 Q2 2017 Parliamentary elections in H2 17 New electoral law drawn up in H2 17 H2 2017 Current government carries on until term ends Parliamentary elections take place as scheduled (May 2018 at the latest) H1 2018 Source: Danske Bank Markets 2 | 28 April 2017 www.danskeresearch.com ItalyResearch Research Italy Disclosures This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske Bank’). 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