ROME (Bloomberg) — Italy’s Prime Minister Enrico Letta will resign Friday, bowing to pressure from his party and possibly clearing the way for a new government led by Matteo Renzi, his chief rival.
“I told the president of the republic, Giorgio Napolitano, of my intention to go to the Quirinale tomorrow to hand in my resignation,” Letta, 47, said in an emailed statement. The Quirinale is the president’s office in Rome.
The announcement ends weeks of intra-party friction that brought the 10-month-old government to a near standstill. Letta, 47, surrendered after the leadership of his Democratic Party voted in Rome to withdraw its support. The resignation gives Napolitano, 88, the option of appointing a new premier or dissolving the legislature and calling snap elections.
“Matteo Renzi is expected take over as prime minister,” Nikolaus Keis, an economist at UniCredit in Munich, said in a note to investors Thursday. “This is good news, as this procedure would avoid early elections and a Renzi-led government would mean some acceleration in the pace of reforms.”
Italy’s 10-year yield fell two basis points, or 0.02 percentage point, to 3.71 percent at 6:05 p.m. Rome time. The political wrangling in recent days hasn’t unsettled the market as the 10-year yield dropped to 3.66 percent Wednesday, the lowest level since February 2006.
The Democratic Party, known in Italy as the PD, favors progressive taxation and has traditionally drawn votes from organized labor and pensioners. While it has the largest number of lawmakers in parliament, the PD needs a broad coalition to reach a majority. Under Letta, that required compromises, notably a more regressive tax policy characterized by the cancellation of a levy on real estate and an increase to the value-added tax.
Renzi, 39, said in a speech Thursday before the PD vote that it was time for a change.
The country needs “to start a new season, with a new executive that lasts for the entire mandate of this legislature,” said Renzi, the PD general secretary and the mayor of Florence. “We thank Prime Minister Enrico Letta” for his work, Renzi said.
The legislature that resulted from a general election last year is due to run until 2018.
Letta’s fall will lead to Italy’s fourth government in a little more than two years. The European debt crisis forced Silvio Berlusconi, a three-time premier, to resign in November 2011. Mario Monti’s caretaker government was brought down by recession, and inconclusive elections in February 2013 left Letta in charge of a coalition of formerly rival parties.
If Renzi takes over with the current legislature, he would become the third premier in a row to form a government without winning a general election.
Renzi has been tabbed by polls since 2012 as one of Italy’s most popular politicians. He won leadership of the PD by tallying more than 1.5 million votes, or 68 percent of the total, in a three-person ballot in December.