Lack of unity at the source of World's economic crisis... Ask me why I am not surprised?
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ROME — Prime Minister Silvio Berlusconi of Italy offered a conditional resignation on Tuesday, agreeing to step down but only after Parliament passes an austerity package — before the country will go to early elections, government sources said on Tuesday evening.
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Vincenzo Pinto/Agence France-Presse — Getty Images Umberto Bossi, center, a key ally in Prime Minister Silvio Berlusconi's center-right coalition, publicly asked Mr. Berlusconi to step aside on Tuesday.
The move comes in the face of an escalating debt crisis that has hobbled Greece, threatens Italy and could infect the rest of Europe.
Mr. Berlusconi had failed to reach a parliamentary majority in a key vote earlier on Tuesday, increasing the pressure on him to resign as markets continued to drive up Italy’s borrowing costs to new records.
Mr. Berlusconi met on Tuesday evening with the President of Italy, Giorgio Napolitano.
Earlier in the day, the prime minister won a budget vote in Parliament but the tally showed he no longer had the support of the majority. While the opposition leader called on him to resign, Mr. Berlusconi wrote his options on a piece of paper captured by a newswire photographer. “Resignation,” was one. He also wrote “eight traitors” about the lawmakers who failed to support him.
Speaking after a meeting of European Union finance ministers in Brussels on Tuesday, Olli Rehn, European Commissioner for Economic and Monetary Affairs, said Italy’s economic and financial position was “very worrying.” He added that the European Commission was “concerned about the situation and we following the situation very closely.”
The budget vote came hours after Umberto Bossi, a key ally in Mr. Berlusconi’s center-right coalition, publicly asked him to step aside for the sake of the country, the euro zone’s third-largest economy and a new epicenter of a crisis that has raised investor anxiety in markets around the world.
Mr. Bossi asked the prime minister to relinquish his post in favor of Angelino Alfano, the secretary of Mr. Berlusconi’s Peoples of Liberty Party, but political commentators said such a government would be seen as a weaker Berlusconi government and hence even less credible.
Mr. Berlusconi’s coalition received 308 votes in favor of passing the budget bill, but 321 lawmakers did not vote — a clear sign that “Mr. Berlusconi no longer has a majority,” said Pier Luigi Bersani, the leader of the opposition Democratic Party. He also called on the prime minister to immediately hand in his resignation to President Napolitano.
Expressing alarm about Italy’s rapidly rising borrowing costs, a reflection of investor fears over the country’s economic future, he said: “We all know that Italy runs the real risk of not being able to access the financial markets in the next few days.”
The vote came after yields on 10-year Italian government bonds — the price demanded by investors to loan Italy money — approached 7 percent, the highest levels since the adoption of the single euro currency 10 years ago.
Fearing that contagion from debt-wracked Greece could spread to Italy, a delegation from the European Commission was due in Rome on Wednesday to step up surveillance of Italy’s reform program.
“It is either European institutions, accountable to our own rules, procedures and accountability, or market forces that will do this,” Mr. Rehn said, referring to the monitoring mission.
While the visit evoked comparisons to Greece’s so-called Troika of foreign lenders, the fundamentals of Italy’s economy are much stronger than those of Greece. But the country has the highest public debt in the euro zone after Greece and structural problems that lead to low growth.
“’The problem in Italy is not primarily the real data,” Germany’s finance minister, Wolfgang Schaüble, said in Brussels on Tuesday. “The debt is high, the deficit is not — economic data are not that bad. The problem is a lack of trust from the financial markets and that of course is a realistic situation. And this trust has to be strengthened.”
Mr. Berlusconi had said earlier that he would decide his political future based on the outcome of the vote, a routine verification of the budget. The vote had taken on immense political importance for the prime minister after the defection in recent days of a number of lawmakers in his party.
“This agony is long because it’s not the end of a government but the end of a system,” said Massimo Franco, a political commentator for Corriere della Sera. “And because the person in question is someone who doesn’t have a sense of the state, a person who subordinates everything to his own personal survival.”
The day he stops being prime minister, Mr. Berlusconi risks losing immunity in several corruption trials.
The prime minister had reiterated that his coalition must stick together to pass a series of austerity measures that will placate the financial markets that have targeted Italy’s financial vulnerabilities, just as they have done in Greece.
But critics countered that Mr. Berlusconi’s lack of credibility was among the chief reasons for the financial attacks on Italy. And after months of parliamentary deadlock, Mr. Berlusconi has shown that he does not have the political backing to push through the measures that are required of Italy to remedy its financial ills.
Last summer, Italy pushed through two sets of austerity measures that financial markets nonetheless deemed insufficient to bolster the country’s economy and make a dent in its huge public debt of 1.9 trillion euros. At 120 percent of gross domestic product, Italy’s debt level is second only to Greece’s in the euro zone.
Last month, Mr. Berlusconi pledged to the European Union that he would approve a new round of restructuring, including the privatization of state assets, liberalizations of the labor market and a modest pension change, but his promises did little to quell market anxieties.
Even the decision taken at the Group of 20 Summit last week to allow the International Monetary Fund to monitor Italy’s implementation of the pledged reforms did little to bolster investor confidence.
Opposition parties did not vote on the budget, which meant that Mr. Berlusconi did not need to reach an absolute majority to pass the measure. Even so, the numbers were closely watched to see whether Mr. Berlusconi could muster a healthy majority that would ensure at least a measure of stability in the short run.
President Napolitano, who is constitutionally required to manage a political crisis, has a number of options open to him, including allowing Mr. Berlusconi’s party to form another government with a new leader or calling early elections.
But neither the current majority nor any of the opposition parties are likely to garner a solid majority on their own, and it is probable that a multiparty coalition with conflicting vested interests would not have the political cohesion necessary to pass unpopular measures.
Another option is to appoint a technocrat — Mario Monti, a former European commissioner, is commonly mentioned — as head of the government for a fixed period of time that would allow for reforms to be enacted.
Despite the crisis, it remains to be seen whether a government led by someone like Mr. Monti would actually come up with the unity to govern.
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