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Italy’s Center-Left Coalition Collapses Days After Agreement

·3 min read

(Bloomberg) -- An Italian centrist party quit its alliance with the Democrats, days after agreeing to join forces in a bid to prevent a right-wing landslide in September elections triggered by the fall of Prime Minister Mario Draghi’s government.

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The Azione party pulled out because “the pieces just didn’t fit together,” its leader, Carlo Calenda, said during an interview with national broadcaster Rai on Sunday.

“I’m not comfortable with this, there is no courage, beauty, seriousness and love in doing politics, so I communicated to the leaders of the Democratic Party that I do not intend to continue with this alliance,” Calenda said.

Still, another centrist party won’t leave the block. +Europe signaled it would remain in a now-diminished Democratic-led coalition for the Sept. 25 vote, according to a statement on Sunday.

Read More: Italy’s Center-Left Join Forces Against Right-Wing Landslide

Italian 10-year borrowing costs fell slightly to 3.02%, erasing an opening advance. But their German counterparts were even lower, widening the spread between the pair by four basis points to 211 basis points and snapping a three-day run of declines.

Azione’s move came a day after the Democrats broke an alliance with Sinistra, a far-left party, and Verdi, Italy’s green party. Another grouping, led by the outgoing Foreign Minister Luigi Di Maio, a former Five Star leader, agreed to team up with the Democrats.

The Democrats’ bid to cement alliances with parties ranging in affiliation from center to far left has been viewed as an attempt to head off a victory by the right-wing bloc led by Brothers of Italy, headed by Giorgia Meloni.

Meloni, 45, said she will be the designated prime minister if her party gets the most votes in the coalition, according to an RTL radio interview on Monday.

Polls signal that with other political forces divided, the right-wing coalition may be headed for a decisive win, with a chance to win two-thirds majorities in both houses of parliament.

After 2020 constitutional reforms, about 37% of seats will be allocated to party candidates that win the most support in constituencies, while the rest will be allocated in proportion to the number of votes they receive nationally. The system encourages parties to form coalitions because that increases their chances of winning the first-past-the-post seats.

Democratic party leader Enrico Letta warned that the move risked helping the right wing, he said in interview to Italian daily La Stampa on Monday, adding that he is still confident the Democratic Party can have a prominent role.

Read More: Italy’s Right Coalition Gains, Five Star Slips in Poll: Corriere

Draghi’s broad coalition collapsed in July after the Five Star Party failed to back the government on a key vote. The departure of the former European Central Bank head has fueled investor concerns about Italy’s public finances and led to a widening of the risk premium between Italian and German bonds.

A change of government could also affect Italy’s commitment to meet its European Union recovery fund targets, which call for reforms to unlock about 200 billion euros ($204 billion) in grants and loans. Moody’s Investors Service cut Italy’s outlook to negative on Friday citing an increase in political and policy uncertainty after the end of the Draghi government and due to fallout from the war in Ukraine.

(Updates with Meloni’s comnent in eighth paragraph)

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