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Italian Prime Minister Conte Resigns, Triggering Search for New Government to Tackle Covid-19, Recession

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ROME—Italian Prime Minister

Giuseppe Conte

resigned Tuesday, ushering in a phase of political instability that could lead either a new government or to elections this spring.

The breakdown of Italy’s left-leaning government comes as the country, like most of the Western world, is struggling to control the spread of the Covid-19 pandemic, vaccinate its population and rekindle economic growth.

The Italian leader’s fall also shows that Europe’s political challenges of recent years—including the fragmentation of the political landscape and the rise of antiestablishment parties—haven’t gone away, despite the pressure that the pandemic is putting on European politicians to work together across party lines.

Mr. Conte stepped down after losing his majority in Italy’s Senate earlier this month, following a fight with a small coalition ally over how to spend massive funds offered by the European Union to help Italy’s economy recover from the impact of the pandemic.

Italy’s head of state, President

Sergio Mattarella,

will start political consultations with parties in Parliament to test whether a new governing majority can be found. Possible scenarios include a government under a new prime minister, or another coalition led by Mr. Conte.

If Mr. Mattarella concludes that no stable majority can be assembled, he will dissolve Parliament and call elections.

The government broke down after a small centrist party led by former Prime Minister

Matteo Renzi

pulled out of the coalition, citing disagreement on how Mr. Conte wanted to spend the more than 200 billion euros, equivalent to $243 billion, in EU recovery funds earmarked for Italy.

Mr. Conte and his main coalition members, the center-left Democratic Party and the populist 5 Star Movement, tried to find new supporters in the Senate, the upper house of Italy’s Parliament, to replace Mr. Renzi’s party, but the search bore little fruit.

However, if a new group of centrist senators willing to support Mr. Conte emerges in the coming days, Mr. Mattarella could appoint him prime minister again. Many political analysts consider this the most likely outcome. It would be the third coalition government led by Mr. Conte since 2018, when the little-known law professor first entered national politics.

“The default solution would be another Conte government, with broader support and significant signs of discontinuity with the past,” said

Lorenzo Codogno,

a London-based consultant and former economist at Italy’s Treasury.

Alternatively, a majority in Parliament might emerge to support a government under a new premier. Mr. Renzi’s party, Italia Viva, has shown more willingness to back a government that isn’t led by Mr. Conte.

A new premier could come from the Democratic Party or the 5 Star Movement, or he might be a politically independent figure with technocratic expertise.

Parts of Italy’s right-leaning opposition have called for early elections, but the parties behind the departing left-leaning government want to avoid that if possible. Opinion polls point to victory for the right.

Opponents of snap elections say they would pose public-health challenges amid the pandemic, and would also delay Italy’s efforts to come up with a plan for reviving its battered economy using EU funds.

Write to Giovanni Legorano at [email protected]

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