Insight -The signals that opened Renzi's path to Italian power

By Massimiliano Di Giorgio and Steve Scherer ROME (Reuters) - Matteo Renzi espoused two rules on his path to power: don't govern without being elected, and don't rely on the establishment that has long called the shots in Italian politics. Then he saw a chance to act. In the past fortnight Renzi, who leads the centre-left Democratic Party but is not a member of parliament, has surprised even close allies with an abrupt change in tactics. Capitalising on signs of support from special interest groups in industry and the media, he has staged a bold power play that should see the 39-year-old installed as Italy's youngest prime minister next week. This carries risks for the man who will now govern one of the euro zone's sickest economies, as Renzi himself acknowledges. "There is an element of personal risk in putting myself in play right now. Politicians must take risks at certain moments," he told the Democratic Party (PD) last week. The political coup to install Renzi as prime minister was sealed on February 10 at the Quirinale, the sumptuous presidential palace that sits atop one of the seven hills of ancient Rome. Dining with President Giorgio Napolitano that Monday evening, Renzi said he could no longer wait to lead his country, according to people briefed on their conversation. Delay might squander the political momentum he had to drive vital economic and electoral reforms, Renzi told Napolitano, who is almost 50 years his senior and the man with the power to name prime ministers in Italy. Within 72 hours of the Quirinale dinner, Renzi had engineered the fall of Prime Minister Enrico Letta. Renzi, whose current elected office is as mayor of Florence, now expects to announce his cabinet shortly - a PD source said he would present the list to Napolitano on Friday. He will then face a first parliamentary vote of confidence on Monday. Once that hurdle is crossed, he will become the third Italian prime minister in a row to take office without winning a parliamentary election. Renzi declined requests to be interviewed while a spokesman for Napolitano would not give any details about the dinner. However, two dozen politicians, government officials and Renzi allies gave Reuters an account of his move on the premiership. A former boy scout and TV game show winner, Renzi has been Italy's rising star since he pushed aside his former boss to become mayor of Florence in 2009. He burst into national politics only in December last year when he took the helm of the PD, Italy's largest political group. Asked last year in a TV interview how he wanted to gain power, he replied: "By winning the elections and not through backroom deals." But by last week he had revealed his immediate desire to lead, catching his closest allies off guard. "People have accused me and the PD of having an outsized ambition. I don't deny this. We all need to have this, from me to the last party member," he told the PD leadership committee. "I am asking you to help us get Italy out of the mire." ESTABLISHMENT FACTIONS Renzi had also promised to keep his distance from the "poteri forti" - a loosely defined group of establishment factions ranging from the Confindustria business lobby to the Roman Catholic Church, from banks and big companies such as Fiat to the opinion-forming newspapers Corriere della Sera and la Repubblica. He has consistently presented himself as an anti-establishment politician - and that extended to his own party. In his climb to the top, Renzi's slogan has been that PD chiefs should be "sent to the scrapyard". This proved popular with voters fed up with the professional political class. Nevertheless, it was criticism of Letta from some of the poteri forti or powerful forces that brought his change of mind, said the politicians, officials and allies interviewed for this article. The most clear signal of growing establishment consent came on February 6 when the head of Confindustria said he was fed up with the slow pace of reform under the Letta government. On the same day, the leader of the biggest labour union wrote Letta a caustic open letter, and there were also signs that Corriere della Sera, Italy's most influential daily and a strong supporter of Letta for months, was cooling on him. "Over the last three months the Letta government stalled, and Italy was put in a really tough spot," said Sandro Gozi, a PD lawmaker. "We thought the best solution was to install a stable government." "The world of businesses and even unions began pushing hard for a change," Dario Nardella, a friend of Renzi's from Florence who is also a PD lawmaker, said in a radio interview. "We realised we needed something completely new." By using the shifting establishment mood to help orchestrate a change in government, Renzi risks tainting his carefully-cultivated image of the dynamic outsider. Beppe Grillo, head of the anti-establishment Five-Star Movement that won 25 percent of the popular vote in elections last year, jumped at the opportunity. "You are not credible," Grillo screamed at Renzi during a meeting on Wednesday that was streamed online. "You represent banks and the poteri forti. You are young, but also old." DEMOLITION MAN In 2008, against the wishes of the party, Renzi ran in the PD primary for Florence mayor, defeating Lapo Pistelli, his political mentor. In a book entitled "Matteo the Conquerer", Pistelli was quoted as likening Renzi to the Road Runner cartoon character: "He zips past, leaving everyone who is trying to push him off a cliff in his dust." Renzi ran for the PD leadership in late 2012 but lost to Pier Luigi Bersani, who then failed to win last year's national election. Letta's right-left coalition formed in April 2013 was envisaged as a temporary government to tackle reforms, notably an overhaul of the electoral law, which has bred unstable governments for years. Renzi waited in the wings and then in December he won 70 percent of the almost 3 million votes cast in a PD leadership election. By the end of last year, the economy had scraped back to growth after struggling through its worst recessions since World War II. But deeper problems remained: Italy has been one of the worst performers in the euro zone since its creation more than a decade ago. The economy has shrunk more than 9 percent since the global financial crisis began. Letta's government, beholden to the right and left-wing factions in parliament as Renzi himself will be, lacked the weight to push through radical reforms. On the morning of Thursday, February 6, Confindustria President Giorgio Squinzi warned Letta that if the government didn't act, he would appeal to Napolitano "who will make the right decision with his great wisdom". The 88-year-old president had already orchestrated two changes of government since late 2011. After speaking in a radio interview, Squinzi headed to Florence for an event. And on that same day the leader of the CGIL union, usually an opponent of Confindustria, also wrote to Letta calling for urgent action. In the shifting world of Italian politics, where friends and enemies constantly watch each other for signs of weakness, Renzi sensed it was the moment to make a move, several officials close to the prime minister-designate said. "When Confindustria and CGIL made statements that signalled they had abandoned Letta, the conditions changed," said one of these officials who said he was not authorised to speak publicly about the political situation. "There was an entire chorus, vast though not unanimous, that declared an end to the previous government and invoked the arrival of Renzi," said Paolo Gentiloni, a former minister and PD lawmaker who has long backed the Florence mayor. DILEMMA Renzi also had a concern: if the PD fared poorly in upcoming European Parliament elections, his own chances in a subsequent Italian national vote might suffer. Most politicians agree that without a new electoral law, there is little point in holding a national vote because it would probably produce a stalemate. Napolitano has also said he would not call elections under the current law. "We would have had to pass the new electoral law very, very, very quickly in order to seek a vote this year," said Gozi, the PD lawmaker. A few days before the Quirinale dinner, Renzi discussed the possibility of a government shakeup with Angelino Alfano, head of the centre-right NCD party, according to a person close to Alfano. The NCD has backed Letta in parliament and would be in a Renzi administration. By the time Renzi addressed top PD officials on February 6, he was ready to seek the top job. "At the moment, the course is the one set by (Letta) ... Do we want to change course?" he said. "No problem, let's discuss it." These words caught the party's governing committee completely off-guard, one of the committee members said. Renzi now needed to make sure Napolitano would not stand in his way. According to a PD official who has worked close to Renzi since 2012, the mayor hoped to persuade the president that he had enough party and popular backing to take over. "When Renzi went to have dinner with Napolitano he realised that the president was not going to support Letta to the death," said the official, who said he was not authorised to speak publicly about Renzi's meetings. Asked about the fate of the Letta government the next day, Napolitano told reporters any change in the premiership "was up to the PD to decide." Letta tried to resist, unveiling a new reform agenda on February 12 and saying he would not step down unless the PD openly withdrew its backing. The next day top PD officials voted to force him out, and Letta formally resigned on Valentine's Day. Renzi has promised to reform the electoral law, labour system, public administration and taxation schemes by May. As he was drawing up his new government, 60,000 small business owners protested on Tuesday in central Rome. "The country is on the edge," said Renato Boraso, a small entrepreneur from Venice who had come for the rally. "The new incoming government must take decisions and not waste any more time, because there is no more time to waste." (Additional Reporting By Paolo Biondi, Giselda Vagnoni, James Mackenzie, Silvia Ognibene, and Alessandra Galloni; Writing by Alessandra Galloni; editing by David Stamp)