Italian premier challenged from own party

Associated Press
Florence Mayor and Italian center-left Democratic Party leader Matteo Renzi drives away as he is chased by reporters following a meeting with Premier Enrico Letta at Chigi Palace government office, in Rome, Wednesday, Feb. 12, 2014. Letta battled Wednesday to stay in office amid a power play by supporters of the dynamic head of his party, Renzi, to replace him as premier in the latest chapter to convulse Italy's fragile political stability. Renzi arrived at Letta's office at Palazzo Chigi for a make-or-break meeting ahead of a Democratic Party summit on Thursday that is expected to determine the government's next steps. (AP Photo/Riccardo De Luca)
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Florence Mayor and Italian center-left Democratic Party leader Matteo Renzi drives away as he is chased by reporters following a meeting with Premier Enrico Letta at Chigi Palace government office, in Rome, Wednesday, Feb. 12, 2014. Letta battled Wednesday to stay in office amid a power play by supporters of the dynamic head of his party, Renzi, to replace him as premier in the latest chapter to convulse Italy's fragile political stability. Renzi arrived at Letta's office at Palazzo Chigi for a make-or-break meeting ahead of a Democratic Party summit on Thursday that is expected to determine the government's next steps. (AP Photo/Riccardo De Luca)

ROME (AP) — Italian Premier Enrico Letta faced a new challenge to his leadership Thursday as the head of his own party tried to orchestrate a power grab.

Florence Mayor Matteo Renzi called a party leadership meeting to decide whether to yank support from Letta's fragile coalition government, accusing the premier of failing to make progress on key financial reforms.

Renzi, 39, has been critical of Letta since December, when Renzi was voted head of their Democratic Party.

If successful, Renzi could be tapped to form a new government, but it would need to win a vote of confidence in both houses of Parliament.

"I believe that Italy is going toward a new Renzi government," said Giovanni Orsina, deputy director of the school of government at Rome's LUISS University. "Whether this is going to be stronger than Letta's government and more stable, of course, is to be seen."

Letta, 47, made a pitch to hold on to power Wednesday, highlighting the economic relief since he took power 10 months ago. He said the economy is showing signs of growth after years of contraction and the country's high public debt has begun to decline for the first time in six years.

While analysts say a Renzi government could accelerate reforms, it also risks alienating Silvio Berlusconi's center-right party, an influential component of the opposition.

"One of the thorniest issues we see is the reaction of Berlusconi's Forza Italia, which opposes a Renzi-led government," said Unicredit analysts Chiara Corsa and Loredana Federico.

Investors appeared unfazed by rapid escalation of Italy's political discord. Italy had no trouble selling long- and medium-term paper, raising 7.5 billion euros ($10 billion) in a set of bond sales that saw yields drop in across the board.

If Letta survives the new challenge, a major Cabinet reshuffling is likely.

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