By Philip Pullella
ROME (Reuters) - Former Prime Minister Matteo Renzi said on Tuesday that Italy's largest parties agree on the need for a proportional representation electoral system and that a law to adapt it should be enacted in the first week of July.
Renzi's confirmation of the position of the ruling center-left Democratic Party (PD), of which he is head, raised the chances of an early national election before one is due to be held in May, political commentators said.
Some commentators said an approval of a new electoral law in early July would raise the chances of an unprecedented autumn parliamentary vote, perhaps as early as September.
In an address to the PD directorate, Renzi, who previously had favored a first-past-the-post system, said it was now clear that the country was heading toward a German-style proportional representation system in which parties must reach a 5 percent threshold to enter parliament.
"I propose that we (the directorate) approve supporting a German-style system," he said, adding that he expected the law to be passed in the first week of July.
He said there was a "a significant convergence" with the two other large parties, the anti-establishment 5-star Movement and Former Prime Minister Silvio Berlusconi's center-right Forza Italia, for a German-style system.
Italy has never had a parliamentary election later than June.
President Sergio Mattarella, the supreme arbiter in Italian politics and the only person who can dissolve parliament, has insisted that a new voting law must be passed before calling an election because currently there is a discrepancy between different systems for the two houses of parliament.
Top officials from the three biggest parties said on Tuesday that they thought an election would be held in the autumn.
A new government would have to pass a budget expected to have an estimated 17 billion euros ($19 billion) in spending cuts or extra revenue by the end of the year.
The 5 percent threshold is opposed by smaller parties, including the Popular Alternative (AP) ld by Foreign Minister Angelino Alfano, which supports the government and has three ministers in the cabinet of Prime Minister Paolo Gentiloni.
The PD and 5-Star are neck-and-neck at 30 percent, polls show, while the only other parties that would make it into parliament over the 5 percent minimum threshold would be the far-right Northern League and Forza Italia.
Polls also show a proportional representation PR system would not produce a clear winner.
On Tuesday, Italian stocks made up for losses on Monday that traders said were due to worries over an early vote.
(Reporting by Philip Pullella; Editing by Alison Williams)