ROME • Talks on creating a new Italian government entered a decisive phase yesterday as fears mounted that any new premier will have to handle a politically toxic banking crisis.
President Sergio Mattarella is trying to broker a deal among political parties on the creation of a caretaker administration to guide the country to elections.
A nationwide vote is due by early 2018 but could take place up to a year earlier if there is no deal.
Foreign Minister Paolo Gentiloni has emerged as the pundits' favourite to succeed Mr Matteo Renzi amid swirling speculation that the outgoing Prime Minister's re-appointment was also an option. Mr Renzi resigned after a crushing defeat in last weekend's referendum on constitutional reform, plunging the country into a political crisis just as the long-anticipated banking crunch landed in the finance ministry's lap.
Mr Mattarella spent last Thursday and Friday talking mainly to fringe parties without sufficient numbers in Parliament to sway the decisions he has to make.
NO TIME TO LOSE
It is important to end this government crisis quickly, because of the urgent pressures we face.
INTERIOR MINISTER ANGELINO ALFANO, after meeting President Sergio Mattarella.
The real work began yesterday, with talks with junior coalition party the New Centre Right (NCD) to be followed by meetings with officials of the populist Five Star Movement, former prime minister Silvio Berlusconi's Forza Italia and Mr Renzi's Democratic Party (PD).
The Five Star and the anti-immigrant Northern League, which visited Mr Mattarella on Friday, have called for an immediate vote.
Interior Minister and NCD leader Angelino Alfano said his party would support a new mandate for Mr Renzi, although a parliamentary source said last week that the PD leader had ruled out - for the moment - staying on as a caretaker.
"It is important to end this government crisis quickly, because of the urgent pressures we face," Mr Alfano said, listing poverty and deprivation - issues highlighted by the referendum result - and the need to prop up fragile banks.
He also said work should start on writing a new electoral law before a constitutional court ruling on the legitimacy of the current one, which is scheduled for Jan 24.
Three PD lawmakers close to Mr Renzi said Mr Renzi's top pick to lead an interim government would be Mr Gentiloni.
In this scenario, Mr Gentiloni would oversee the writing of a new electoral law and the PD would hold primaries for candidates to lead the party into elections in spring, the lawmakers said.
But President Mattarella may want to ensure the support of Mr Berlusconi's Forza Italia, to allow the legislature to last until 2018, one of the lawmakers said, throwing open the candidate field.
The need for a new government has become pressing following the European Central Bank's decision to reject Rome's request for more time to persuade investors to back a €5 billion (S$7.5 billion) private bailout for troubled bank Monte dei Paschi di Siena (BMPS).
The bank, identified as being vulnerable to failure in stress tests last year, had asked for an extra five weeks to raise the funds it needs to avoid a government bailout under which, according to EU rules, debt holders will have to share some of the losses.
BMPS shares slumped more than 10 per cent last Friday, taking this year's slide in value to 85 per cent. The bank's board was holding crisis talks over the weekend.
Saving the world's oldest bank will be politically difficult for whoever oversees the operation.
Most analysts see it and other Italian banks as needing radical restructuring involving inevitable redundancies. But there are many small investors who have BMPS bonds, and their savings will be hit in any rescue deal.
Imposing losses at smaller banks last year hit Mr Renzi's standing hard and had been linked to at least one suicide.
AGENCE FRANCE-PRESSE, REUTERS