Italy's President Napolitano steps down, setting challenge for PM Renzi

ROME (Reuters/AFP) Italy's 89-year-old President Giorgio Napolitano stepped down on Wednesday after almost nine years in office, a statement said, forcing Prime Minister Matteo Renzi into a politically delicate balancing act to appoint a successor.

Napolitano had always been expected to step down before the end of his second term, explaining two weeks ago that his advanced age had made it increasingly difficult for him to perform the duties of his office.

Prime Minister Renzi paid tribute to the president on Tuesday, telling the European Parliament that Napolitano had been a man driven by the desire to reform, who "faced moments of great difficulty with intelligence and wisdom." Parliament now has to meet within 15 days along with 58 regional deputies to begin elections to choose a new president.

Speculation has been going on for months over who will succeed him in an office which has wide but loosely defined powers that range from naming prime ministers and vetoing laws to exercising moral suasion over government policy.

Potential candidates for the new head of state include former prime ministers Romano Prodi and Giuliano Amato, as well as Economy Minister Pier Carlo Padoan, Defence Minister Roberta Pinotti and former Rome mayor Walter Veltroni.

European Central Bank chief Mario Draghi on Wednesday rejected speculation that he had his eye on the job.

The presidential election carries political risks for Renzi, whose government was ushered into power last year with Napolitano's blessing.

The successful candidate must win the votes of two-thirds of lawmakers in both houses of parliament - and Renzi will need to keep the more rebellious wing of his party in line to ensure he gets his man.

The 40-year-old will want a candidate who can help bridge political differences which otherwise threaten to scupper the PM's ambitious reform programme.

Renzi also needs someone willing to dissolve parliament and call snap elections as experts say that he has not ruled out another poll as a last resort to getting his way on the reforms.

Christian Schulz, Berenberg senior economist, warned that investors would be watching closely "after the recent experience of Greece, where the pro-reform government tripped over presidential elections on 29 December, triggering snap elections that look set to be won by the radical left."

"Failure to elect a president would probably force new elections, maybe even a change of leadership in the ruling Democratic Party," he said.

In order to stave off a crisis, Renzi may be forced to clinch a deal with the opposition, particularly former premier Silvio Berlusconi - a likely but controversial move bound to spark a heated response from those on the far left of his Democratic Party (PD).

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