ROME, Dec.18 (Xinhua) -- Italy's political uncertainty triggered by former prime minister Matteo Renzi's resignation will continue into the next months, an expert has told Xinhua in an interview.
"There could be early elections. With this new government, probably the Italian political situation will not be stabilized," said Ettore Greco, director of Institute of International Affairs based in Rome.
Renzi resigned on Dec. 7 three days after his defeat in a referendum on a constitutional reform.
The resignation then triggered a political crisis, which temporarily ended after the formation of a new government by Paolo Gentiloni under a mandate of Italian President Sergio Mattarella.
Gentiloni was former foreign minister in the previous government and also a member of Renzi's Democratic Party.
Though Gentiloni has reinstated many ministers of the previous government, Greco believes the challenges facing the new government are bigger than those of the previous one.
"Renzi's government experienced difficulties in doing reforms, and this new government will have more difficulties, because it is politically weakened and will suffer the absence of his charismatic figure," Greco said.
Furthermore, Greco noted that the new government will have to face two big structural problems, namely the fragility of the Italian banking system, which has been emerging this year, and the public finances issue.
The expert worries that the government will have to save the banks with public money, or leave some costs to the bondholders of the banks.
"This will not be viewed favorably by a part of the population," Greco cautioned.
The country's public finances issue is also in a dilemma, as the discussions between Italy and European bodies will continue.
"The Ecofin (the European Commission's finance committee) asked Italy to do some measures to secure public finances. If the government does it, it will undertake unpopular measures. If it does not do it, there will be tension with Brussels," Greco explained.
But the expert doesn't foresee a major financial crisis or a market crash in Italy feared by many others, despite some signals of fragility, such as a weakness of stock markets and bank shares, a little outflow of capital.
"If the European and International context remains the same, this situation could continue like this. If an external shock happens, or other external factors intervene, Italy could experience more risks," the expert said.
