Italy's Former Prime Minister Matteo Renzi Regains Party Leadership -- Update

By Deborah Ball Features Dow Jones Newswires

Italy's former prime minister Matteo Renzi has won a leadership contest to head the left-leaning Democratic Party in the country's next general election.

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Late Sunday, Mr. Renzi was re-elected secretary of the Democratic Party--Italy's largest establishment party--making him the group's candidate to become the next prime minister in parliamentary elections due by mid-2018. He won by a wide margin, over 70% in initial results, putting down a challenge that exposed dangerous splits within the party, which has lost ground to the anti-establishment 5 Star Movement.

The race represents "a new page" for the party, he told supporters late Sunday.

The election comes as attention turns to Italy from France where expectations are that Sunday's presidential elections will see centrist Emmanuel Macron beat anti-euro Marine Le Pen, squashing the immediate risk of an anti-Europe party coming to power in the bloc's heartland.

That risk, however, remains a real prospect in Italy. Polls this month show popular support for the 5 Star Movement at as much as 32%, making it Italy's largest political group and putting it several percentage points ahead of the Democratic Party. Investor concern over Italy's political and economic situation has been illustrated by the growing gap between Italian ten-year bonds and their German equivalents.

Mr. Renzi, 42, faces a steep challenge in rallying Italians to his party. The Tuscan politician resigned as prime minister in December, bringing to an abrupt end a government that had been one of the most reform-minded in Europe.

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He stepped down after voters in a referendum resoundingly rejected constitutional changes that would have streamlined lawmaking. Mr. Renzi was replaced as prime minister by fellow Democratic Party member Paolo Gentiloni who has strong cross-party ties.

Mr. Renzi's government was in power for more than two years, passing legislation to loosen the labor market, support the country's beleaguered banks and reform a judicial system that can take a decade to produce decisions.

However, many Italians felt little relief and the economy continues to be the slowest growing in Europe, struggling to tap into a broader economic recovery that has lifted other peripheral countries such as Spain and Ireland. At the same time, Italy remains the main front on Europe's migration crisis. A surge in arrivals of seaborne migrants from Libya puts Italy on track this year to easily pass the 180,000 arrivals it recorded for 2016.

As a result, anti-european sentiment has been rising in Italy. A February survey found only one in three Italians hold a positive view of the EU, significantly down from a decade ago, when about three-quarters of Italians regarded the bloc positively. In a recent poll, 52% of Italians said they would like to remain in the single currency, but about 40% said they would prefer to leave.

Some see similarities between Mr. Renzi and Mr. Macron--both young, centrist politicians--but the Italian leader has responded to growing dissatisfaction with the EU in Italy by growing increasingly critical of the bloc, while Mr. Macron has run on a largely pro-EU platform.

Mr. Renzi's challenge will be to defend the Democratic Party's broad commitment to the European Union, while competing with the growing anti-euro chorus from Italy's other political parties.

The 5 Star Movement is calling for a referendum on whether Italy should remain in the single currency, and a number of other smaller populist parties are also sharply anti-euro. Fewer than half of Italians support the country sticking with the currency.

Write to Deborah Ball at deborah.ball@wsj.com

(END) Dow Jones Newswires

May 01, 2017 05:42 ET (09:42 GMT)