Davos WEF
Davos WEF

Italy prime minister rules out coalition with Berlusconi's center-right bloc after upcoming election

Key Points
  • Italy's Prime Minister Paolo Gentiloni said the expected outcome of a hung parliament would not be good for the country.
  • "I think that the populist anti-EU position will not prevail and that Italy will keep its stability," he said.
  • Italian elections will be held on March 4 and if there is no clear winner, a coalition government will have to be formed.
Populist anti-EU position will not prevail in Italy, says Prime Minister Gentiloni

Italy's caretaker Prime Minister Paolo Gentiloni ruled out forming a coalition with Silvio Berlusconi's center-right bloc after the forthcoming Italian election.

Asked whether his center-left Democratic Party (PD) could support a government coalition formed with the center-right bloc made up of Forza Italia, the party of former Prime Minister Berlusconi, and Lega Nord (a Euroskeptic party), Gentiloni gave an emphatic "no."

The comment is interesting given that Italian Finance Minister Pier Carlo Padoan said earlier in January that a coalition between Italy's main left- and right-wing parties could not be ruled out if no clear winner emerged from the general election on March 4.

"To answer your question directly, no I would not be interested (in forming coalition with Berlusconi's center-right bloc)"

Gentiloni added that the expected outcome of a hung parliament in March would not be good for the country.

"We hope this will not be the case and that the center-left that I represent will have a majority, " he said. "In any case I think we will be the pillar of a possible coalition and we have certain expertise in flexibility in politics in my country," Gentiloni added.

"But I think that the populist anti-EU position will not prevail and that Italy will keep its stability," he said.

Italian elections will be held on March 4 and if there is no clear winner, a coalition government will have to be formed meaning potentially more political uncertainty and economic instability for the euro zone's third-largest economy.

Italian Prime Minister Gentiloni: 2018 could be the year of the EU's relaunch

A 'key moment' for the country

Italy's economy has only just started to recover from a long period of intermittent recession, hence more uncertainty is unwelcome. Gentiloni said the election was a key moment for the country.

"We are exactly on the right track because the economy is back in growth — just one year ago the IMF (International Monetary Fund) had a forecast for 2017 of 0.7 percent growth in Italy but now it has been revised by the IMF to 1.6 percent growth for 2017 — but as we all know the fact that we have positive (growth) numbers doesn't mean automatically that we've solved our social and political problems."

"So we have to be very careful with this election not to disrupt the reforms that we've realized in the last five years with the effort of Italian workers and enterprises. To disrupt this would be very serious," he said.

According to the latest poll by Tecne released on January 22, the anti-establishment, Euroskeptic Five Star Movement (M5S) under Luigi Di Maio is leading voter polls, with 27 percent of the vote.

Second is the Democratic Party, fronted by party secretary the former Prime Minister Matteo Renzi, is seen with 22.3 percent of the vote.

Italian prime minister: Center-left will be pillar of any coalition

In third place as a sole party is the center-right Forza Italia led by former Prime Minister Silvio Berlusconi, with 18.2 percent of the vote, followed by Lega (Nord), a right-wing pro-Northern Italy party with 12.6 percent of the vote. The two parties could form a coalition government with the help of the smaller Fratelli d'Italia party, which is also Euroskeptic.

Gentiloni had little expectations that such an alliance would survive, saying that the center-right coalition was one of "very different positions."

"One is a conservative party (Forza Italia) and the other one and two are populist, anti-EU parties (Lega Nord and Fratelli D'Italia). I think that this coalition won't stay in place," he said.

Prime Minister Paolo Gentiloni, who was given the role after Matteo Renzi resigned following a failed referendum on constitutional reform, is not running for re-election although he is popular with the business community.

"I am in good health but my commitment was, 13 months ago, to try to bring the country to the end of our legislature, addressing reforms and a couple of very serious crises on migration and the banking system. This was my commitment and the commitment ends with the election, after the election we will see," he said.

Government has been 'very effective'

Meanwhile, Mario Greco, the chief executive of Zurich Insurance, told CNBC Wednesday that the Gentiloni government had been "very effective."

Italy PM Gentiloni's government has been very effective, says Zurich Insurance CEO

"I think it's (Gentiloni's government) been appreciated by the markets, it's been appreciated by investors and it's been appreciated outside of Italy," he said, hoping that the recovery seen in the country would continue.

"Italy has to continue. Italy has been improving, it has been recovering, it is clearly one of the troubled issues of the European economy still today but it's getting much better and it's heading in the very right direction and so it has to continue."

Fellow Italian Chief Executive, Claudio Descalzi from Italian energy firm Eni, told CNBC that Italy needed strong and stable government.

"Without expressing any political view because it's not my role, what we really need after the election is a strong government that gives continuity and continues reforms that were started under the previous government (of Matteo Renzi)," Eni's Claudio Descalzi told CNBC at the World Economic Forum in Davos, Switzerland.

"We have to make Italy attractive from an investment point of view. Italy's doing very well, we've increased the gross domestic product (GDP), the average was 1.6 percent/1.7 percent and we have record exports of more than 500 billion euros last year so ... Italy has a lot of potential," he said.

Eni CEO: Italy needs a strong government