Earlier today, newly reelected Italian president Giorgio Napolitano appointed the deputy leader of the Partito Democratico (PD, Democratic Party), Enrico Letta, as Italy’s newest prime minister.

Letta will now seek a ‘grand coalition’ government with Silvio Berlusconi and the Popolo della Libertà (PdL, People of Freedom).  Former centrosinistra (center-left) leader Pier Luigi Bersani repeatedly refused previous attempts at a ‘grand coalition’ in post-election talks since February.  While it means more short-term stability for Italy and it likely means Italy won’t return to the polls this summer or even perhaps this year, it seems unlikely that the Letta-led coalition will endure for a full five-year term, which means that Italian government will proceed with one eye looking toward the next elections.

So who is Letta and what would a Letta-led government mean for Italy?

The basics are rapidly becoming well-known: he’s from Pisa, he was a European affairs minister in the government of Massimo D’Alema in the late 1990s, he was first elected a member of Italy’s lower house, the Camera dei Deputati (House of Deputies), in 2001, and he was a European Parliament MP from 2004 to 2006.  He was a candidate for the leadership of the Democratic Party when it was first established in 2007, though he lost that race to the wide favorite, former Rome mayor Walter Veltroni.  His uncle, Gianni Letta, is one of Berlusconi’s top advisers, and was himself the PdL candidate for the Italian presidency back in 2006 when Napolitano was first elected. 

As OpenEurope writes this morning, Letta’s both pro-European and apparently anti-austerity, making him a good bridge between outgoing prime minister Mario Monti and the more populist elements in the PD, the PdL and the Movimento 5 Stelle (M5S, the Five Star Movement).

In other words, Napolitano has appointed a Prime Minister with solid European credentials and who can credibly argue for an easing of austerity in the EU. Quite smart.

At age 46, he would be the second-youngest prime minister in post-war Italy, much younger than Giuliano Amato, the 74-year-old who led center-left (largely technocratic in nature) governments in 1992-93 and 2000-01.  Amato had been mentioned as Napolitano’s favored candidate since Napolitano’s reelection as president on Saturday, and Florence mayor Matteo Renzi had also been thought to be a contender for prime minister.  Letta, in contrast, was a bit of a surprise, though his appointment is not incredibly outlandish.

In many ways, Letta melds the best of both an Amato appointment and a Renzi appointment.

Like Renzi, he’s part of a new generation of Italian leadership, but Berlusconi apparently scoffed at the elevation of the most popular center-left politician in Italy, and Renzi himself is probably relieved not to have to lead a coalition government that will leave much of the center-left disillusioned and that could still lead to the disintegration of Italy’s still-young Democratic Party.

Although Amato once served as my professor in Italy, I believe he would have been a problematic choice for a ‘technocratic’ government for two reasons.

The first is that Italy has already had a technocratic government since November 2011, and the intervening February 2013 election results should clearly inform the creation of the next government.  No one voted for Letta, perhaps, but his government will be political, not technocratic, and it will have a political cabinet and an agenda hammered out between the two largest forces in the Italian parliament.  Despite what remains a very wide gulf between Berlusconi and the centrosinistra, the German ‘grand coalition’ example remains a best-case lodestar for the newly minted Letta government.

The second is that Amato, fairly or unfairly, remains a link not only to Italy’s past, but to the collapse of its first republic. Though he’s one of the few members of Italy’s old Socialist Party to make a successful transition to the second republic (he served as the minister of the interior in the late 2000s under prime minister Romano Prodi), his appointment would symbolize so much of what’s wrong about Italian political leadership.  As the septuagenarian prime minister of an octogenarian president, I fear Amato — no matter how competent a prime minister — would have highlighted the rule of an Italian gerontocracy that refuses to leave the stage after decades in power.

So what’s next? 

First and foremost, we’ll wait to see the coalition agreement and the cabinet that emerges under Letta — it will presumably include Angelino Alfano, the PdL general secretary, as deputy prime minister, but it’s uncertain who will tackle the key finance, economic development, labor and foreign policy portfolios, and it’s uncertain how many of Letta’s appointments will come from outside the political world.

He faces crucial obstacles with just about every constituency.

Concerns from the left.  The governing coalition will split the current centrosinistra, and Nichi Vendola’s more leftist Sinistra Ecologia Libertà (SEL, Left Ecology Freedom) will remain in opposition.  That, in itself, should have little impact on the coalition’s ability to govern.  But in light of Bersani’s embarrassing week — both his candidates for Italy’s president, former Senato president Franco Marini and Prodi, were defeated — Italy’s left is as fragmented as ever.  The Democratic Party remains leaderless and divided in advance of a leadership contest that is sure to be messy and that Renzi is not necessarily certain to win, despite his massive popularity among the entire electorate.  So Letta’s top priority as the deputy leader of the Democratic Party will be to keep the party from falling apart, and presumably, he’ll pull on his relationships with both Bersani and D’Alema to do so.

Concerns from the right.  Letta has already warned Berlusconi that he won’t form a government ‘at all costs,’ signaling that, for now, it’s the Democratic Party, and not Berlusconi’s forces, that is in the driver’s seat.  But the Lega Nord (LN, Northern League), Berlusconi’s autonomist allies, have indicated they may join Letta’s government after refusing to support the Monti government and warning that an Amato government would be unacceptable.  In light of SEL’s decision not to join the Letta government, that means, in Italy’s upper house, the Senato, at least, the centrodestra (the center-right) will be a larger element of the government than the centrosinistra.  Berlusconi also has the upper hand politically — as Bersani crumbled, polls showed Berlusconi and the centrodestra with an increasingly clear lead in the event of new elections.  So Berlusconi is likely to demand at least the revocation of the ‘IMU’ property tax, a widely disliked levy passed by Monti’s government, and he’ll probably get his way.  The new government will almost certainly promise to take up tax and economic reforms and probably also electoral reform — though while everyone agrees Italy’s election law should be changed, I’m not sure everyone agrees on the best way to do so.

Concerns from Beppe Grillo.  Grillo and his brigade of Five Star legislators will certainly form a spirited opposition to Letta’s government.  If Letta fails to deliver some tangible markers of success, Grillo’s attacks could lead to even larger gains in the next Italian elections.  While Grillo’s over-the-top rhetoric overstates his case (e.g., Napolitano’s reelection was not a coup, no matter how loudly Grillo shouts that it was), it’s undeniable that both Napolitano’s election and the new ‘grand coalition’ represents the two established forces of Italian politics ganging up to shut out the Five Star Movement, even more so given that Letta family members are now set to be key fixers on both the left and right.  So if Letta isn’t successful, Grillo will be able to paint both the centrodestra and the centrosinistra as politically exhausted movements.  If they’re smart, the Democratic Party will keep the popular Renzi, who’s called for a new generation of Italian political leadership, and who strikes many of the same reform-minded notes as Grillo, far away from Letta’s government.

Concerns from reformers.  Monti has already pledged his full support to Letta.  Though Berlusconi, Letta and Grillo all seem to share growing distaste for ‘austerity,’ the good news is that the key to jumpstarting Italy’s economy isn’t so much about implementing austerity as it is about enacting reform.  Monti, especially early in his tenure as prime minister, pushed through several promising efforts, including laws to increase compliance with income tax payment, but Italy’s labor market and its sclerotic bureaucracy are still in dire need of reform.  Though Italy has a large public debt, much of that was incurred in the 1980s, and its annual budget isn’t incredibly in deficit — that’s true now, while it’s in a growing recession, but it was also true for much of the mid-2000s, when Italian GDP growth was still essentially flatlined.  If Italy can unleash a healthier, streamlined economy through reform, and if it can find novel ways to ameliorate its rapidly declining (and aging) population, the debt issues will be easier to solve.

Photo credit to Salvatore Contino.