Italian government in crisis as PM Letta fights calls to go

Italian Prime Minister Enrico Letta faces a showdown with his own centre-left party that could lead to his resignation.

Rome: Italian Prime Minister Enrico Letta faces a showdown with his own centre-left party on Thursday that could lead to his resignation and the appointment of Democratic Party leader Matteo Renzi as head of a new government within days.

Letta, the head of the unwieldy coalition patched together after last year`s deadlocked elections, is fighting for his political future after growing criticism from Renzi over the slow pace of economic reforms. A meeting of the 140-strong leadership committee of the Democratic Party at 3 pm (1400 GMT) will decide whether he has the backing of his party to continue, or be forced to stand aside less than a year after taking office. On Thursday, Angelino Alfano, the head of the New Centre Right party that supports his coalition, said Letta could count on a "loyal, correct and fruitful alliance" as long as he retained the backing of the PD. But he left it open whether he would continue to support the government if Letta was forced to step down. "We`re not taking anything for granted and we will consider this possibility once it is confirmed," he told Canale 5 television. Tensions in the government have been brewing ever since Renzi won an overwhelming victory in a party leadership primary in December, but the pressure on Letta to resign has suddenly intensified this week. The latest bout of turmoil in Italy, the euro zone`s third-largest economy, has so far had little impact on financial markets, in contrast with the volatility seen during previous crises, such as the deadlock after last year`s election. The risk premium on Italian 10-year bonds over German Bunds stands at just over 200 basis points, comparable with levels seen before its bonds were sucked into the eurozone debt crisis in 2011. However, the continual uncertainty has held back any radical effort to revive an economy struggling to emerge from its worst slump since World War Two, or to cut levels of unemployment not seen since the 1970s.