By Angelo Amante and Andrea Ciociola
ROME (Reuters) - Former Italian Prime Minister Matteo Renzi announced on Tuesday he was leaving the center-left Democratic Party (PD) to set up his own party, in a move that raised tensions in the new ruling coalition and could undermine its stability.
Renzi, who led a PD government from 2014-2016, had a leading role in forming the coalition this month after Matteo Salvini's hard-right League walked out of an alliance with the 5-Star Movement in the vain hope of triggering an early election.
Renzi stressed that his new party would continue to back the government, but his former colleagues and Prime Minister Giuseppe Conte were still dismayed by a decision analysts say may threaten the government's medium-term prospects.
"I have decided to leave the Democratic Party and to build a new house together with others," Renzi wrote on Facebook.
He said the party would be called "Italia Viva", a play on words deriving from "Viva l'Italia!" (Long Live Italy!) that could be loosely translated as "Alive Italy" or "Italy Lives".
The 5-Star/PD coalition will now have to rely for their majority on a new party with its own agenda, complicating policy negotiations.
"This is not a mortal threat to the government yet, but it increases fragmentation and makes its prospects less rosy," said Francesco Galietti, head of political risk consultancy Policy Sonar.
The spread between yields on Italian benchmark bonds and German Bunds widened to 140 basis points, from 133 on Monday.
Conte, a technocrat close to 5-Star, said he was "puzzled" by Renzi's move, which altered the political balance in parliament and was badly timed just after the government was formed, according to a statement issued by Conte's office.
Renzi said Conte had nothing to fear. "For me this government can go on until 2023," he told RAI state television, referring to the natural end of the parliamentary term.
In an earlier interview with la Repubblica daily, Renzi said his new party would enlarge the government's majority.
Earlier this week two PD deputies close to Renzi said he could attract lawmakers from Silvio Berlusconi's centre-right Forza Italia party, whose support has plunged since a 2018 election, leaving space in the political center-ground.
Renzi's supporters hope to fill that space ahead of a widely expected proportional reform of the electoral law that is seen enhancing the bargaining power of small parties.
"A MISTAKE"
Renzi said he would take some 25 lower house deputies and 15 senators with him. The coalition, which also includes the left-wing LEU party, is just eight votes above the minimum threshold in the upper house Senate, where the PD has 51 lawmakers.
It has a much more comfortable majority in the Chamber of Deputies, where the PD has 111 seats.
"We are sorry, breaking up the PD is a mistake", PD leader Nicola Zingaretti, who is from the PD's left, wrote on Facebook.
Culture minister Dario Franceschini, one of the PD's most influential figures, compared his former leader's breakaway to the political divisions that led to fascism in the 1920s.
5-Star leader and Foreign Minister Luigi Di Maio, who has always had acrimonious relations with Renzi, made light of his move, telling the Ansa news agency it was "no surprise".
Renzi has had an abrasive relationship with his former party, especially those on the left, and there were persistent rumors he was planning to set up a new movement.
"There is a cultural faction in the Italian left who see me as an intruder", he told la Repubblica, describing the PD as "a bunch of factions" unable to face Salvini's populist challenge.
As premier, he faced internal criticism when he tried to liberalize the job market and carry out a constitutional reform that was finally rejected in a referendum. It remains to be seen whether Renzi can expand the center-ground of an increasingly polarized political landscape.
He normally comes near the bottom of opinion surveys measuring politicians' approval ratings, and pollsters told Corriere della Sera newspaper on Tuesday his new party would be unlikely to get more than 5% of the vote.
(additional reporting by Giulio Piovaccari, Gavin Jones and Giuseppe Fonte; Editing by Mark Potter, William Maclean and Alex Richardson)
