Italy on brink as furious row breaks out over how to spend €209bn of EU bailout cash

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Members of the coalition government have questioned Prime Minister Giuseppe Conte’s plans for the country’s economic recovery after the pandemic eases. Mr Conte faces a huge challenge in convincing the centre-left Democratic Party and anti-establishment Five Star Movement to back his spending strategy. Former prime minister Matteo Renzi, who quit the Democratic Party in September to form his own Italia Viva, also props up the coalition, holding two ministerial posts.

Italy is set to receive €209billion in grants and low-interest loans from the EU’s €750billion bailout fund to help economies and regions worst-hit by the Covid crisis.

The southern European state is one of the main beneficiaries of the EU package after the virus ravaged the country during the first peak last spring.

Its economy was already struggling before politicians were forced to impose a series of draconian lockdowns to curb the spread of the disease.

Mr Conte is expected to submit spending plans to his cabinet later this week, which could in itself trigger crisis talks for the ruling coalition.

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The Prime Minister will need the support of Italia Viva’s two ministers before the strategy can be rolled out.

Wolfgang Piccoli, co-president of consultancy firm Teneo, said: “In the most likely scenario the crisis will lead to the formation of a new executive.”

He added: “While Italia Viva is only a junior partner in the ruling coalition, the numbers are so tight in parliament, especially in the Senate, that by withdrawing its support it can trigger a vote of confidence in the prime minister.”

Italian MEP Ignazio Corrao told CNBC failure to secure support for his plans could see Mr Conte ousted from his position as prime minister.

Mr Corrao predicted that Mr Renzi would “use all political means he has now in order to have powers in the future”.

He suggested the political dispute could be used tactically to help Italia Viva gain more ground.

On Monday, Mr Renzi said: “My ministers are serious people, in government because they have ideas, not out of vanity and pride.

“If these ideas are not of interest, then we, unlike some others, will give up our ministerial posts.”

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Mr Piccoli believes Mr Renzi could also reject the spending plans to “raise his profile” because his Italia Viva are polling at less than three percent.

But Nicola Zingaretti, leader of the Democratic Party, has warned against crashing the government.

In a statement, she said: “Destabilising the government now would be incomprehensible.”

However, internal rifts in Ms Zingaretti’s own party could see her desperate pleas ignored.

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Senator Andrea Marcucci, part of a growing rebel group, is demanding a vote of confidence in the prime minister Mr Conte.

She insisted it “is not a Renzi manoeuvre”, adding: “We have made very similar proposals.

“The prime minister is evaluating them and if his proposals are reasonable a reshuffled government led by Mr Conte should not be excluded.”

The political feud is likely to infuriate Italian voters as they tussle with a second wave of coronavirus that has seen their country regain the title for the worst death toll in Europe, with more than 75,000 fatalities.

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