Italian Prime Minister Silvio Berlusconi, under growing pressure to resign, suffered a potentially fatal blow on Tuesday when his main ally, Northern League party chairman Umberto Bossi, called on him to go. Berlusconi faces a crucial vote in parliament on Tuesday that could seal his fate.
Italian Prime Minister Silvio Berlusconi's chances of remaining in office appeared to wane on Tuesday after his main political ally called on him to resign. "We asked the prime minister to stand down," Umberto Bossi, leader of the Northern League which governs in a coalition with Berlusconi's People of Freedom (PDL) party, told reporters outside parliament in Rome.
Bossi said the 75-year-old media tycoon should be replaced by Angelino Alfano, secretary of the PDL and a former justice minister. On Monday, Berlusconi denied widespread rumors that he was set to resign in the face of a broadening revolt within both his coalition and his party. Things are likely to come to a head during a Tuesday evening vote in parliament, with the floor debate set to commence at 3:30 p.m. CET.
The political uncertainty pushed yields on Italy's 10-year benchmark bonds as high as 6.74 percent on Tuesday, close to the critical 7 percent level at which economists say borrowing costs are unsustainable. Italian yields are close to the point at which Portugal, Greece and Ireland were forced to seek a bailout and are the highest for Italian bonds since the introduction of the euro.
Berlusconi appeared to remain defiant on Tuesday despite dramatic signals that he had lost the support of markets in turmoil, with bond prices spiking on signs that he may quit and plunging on denials.
Vast Mountain of Debt
"I'm not leaving," was the headline on Tuesday in pro-Berlusconi newspaper Il Giornale, owned by his brother.
If Berlusconi loses the vote -- on the ratification of the 2010 public accounts, one which he has already lost once before -- he could either resign immediately or be ordered by President Giorgio Napolitano to call a confidence vote.
Markets have lost confidence in Berlusconi's leadership due to the prime minister's ongoing inability -- or unwillingness -- to implement the deep reforms necessary to begin chipping away at the country's vast mountain of debt. Sovereign debt currently stands at 120 percent of annual economic output and, with bond interest rates rising, refinancing that debt could become prohibitively expensive.
Furthermore, Italy's ongoing problems have highlighted the deficiencies of the euro backstop fund, the European Financial Stability Facility (EFSF). Only just modified late last month, efforts to boost the fund by having outside investors participate have fallen flat amid ongoing political chaos in Greece and now Italy. In its current form, the EFSF would not be big enough to prop up Italy, which is the third biggest economy in the euro zone behind Germany and France.
Some have proposed the appointment of an interim technocrat government made up of non-partisan experts to implement the necessary budget cuts and economic reforms. But Berlusconi and his allies are opposed to such a move and might thwart it.
Short on Time
There are varying estimates of how many parliamentarians from Berlusconi's coalition will rebel in the vote. He has spent the last few days trying to persuade laymakers to stay on his side. On Tuesday, five PDL mutineers said they would not take part in the vote, putting his majority in danger.
However, with the center-left opposition saying it will abstain, the measure is likely to pass. Still, should Berlusconi's vote total fall to around 310 votes in the 630-seat lower house, the pressure on him to depart will intensify. A no-confidence motion could be brought by the opposition this week.
While markets would welcome Berlusconi's departure, it may cause further political uncertainty. The center-right may insist on early elections, which would delay reforms for weeks or months -- time the euro zone doesn't have.
spiegel.de
Italian Prime Minister Silvio Berlusconi's chances of remaining in office appeared to wane on Tuesday after his main political ally called on him to resign. "We asked the prime minister to stand down," Umberto Bossi, leader of the Northern League which governs in a coalition with Berlusconi's People of Freedom (PDL) party, told reporters outside parliament in Rome.
Bossi said the 75-year-old media tycoon should be replaced by Angelino Alfano, secretary of the PDL and a former justice minister. On Monday, Berlusconi denied widespread rumors that he was set to resign in the face of a broadening revolt within both his coalition and his party. Things are likely to come to a head during a Tuesday evening vote in parliament, with the floor debate set to commence at 3:30 p.m. CET.
The political uncertainty pushed yields on Italy's 10-year benchmark bonds as high as 6.74 percent on Tuesday, close to the critical 7 percent level at which economists say borrowing costs are unsustainable. Italian yields are close to the point at which Portugal, Greece and Ireland were forced to seek a bailout and are the highest for Italian bonds since the introduction of the euro.
Berlusconi appeared to remain defiant on Tuesday despite dramatic signals that he had lost the support of markets in turmoil, with bond prices spiking on signs that he may quit and plunging on denials.
Vast Mountain of Debt
"I'm not leaving," was the headline on Tuesday in pro-Berlusconi newspaper Il Giornale, owned by his brother.
If Berlusconi loses the vote -- on the ratification of the 2010 public accounts, one which he has already lost once before -- he could either resign immediately or be ordered by President Giorgio Napolitano to call a confidence vote.
Markets have lost confidence in Berlusconi's leadership due to the prime minister's ongoing inability -- or unwillingness -- to implement the deep reforms necessary to begin chipping away at the country's vast mountain of debt. Sovereign debt currently stands at 120 percent of annual economic output and, with bond interest rates rising, refinancing that debt could become prohibitively expensive.
Furthermore, Italy's ongoing problems have highlighted the deficiencies of the euro backstop fund, the European Financial Stability Facility (EFSF). Only just modified late last month, efforts to boost the fund by having outside investors participate have fallen flat amid ongoing political chaos in Greece and now Italy. In its current form, the EFSF would not be big enough to prop up Italy, which is the third biggest economy in the euro zone behind Germany and France.
Some have proposed the appointment of an interim technocrat government made up of non-partisan experts to implement the necessary budget cuts and economic reforms. But Berlusconi and his allies are opposed to such a move and might thwart it.
Short on Time
There are varying estimates of how many parliamentarians from Berlusconi's coalition will rebel in the vote. He has spent the last few days trying to persuade laymakers to stay on his side. On Tuesday, five PDL mutineers said they would not take part in the vote, putting his majority in danger.
However, with the center-left opposition saying it will abstain, the measure is likely to pass. Still, should Berlusconi's vote total fall to around 310 votes in the 630-seat lower house, the pressure on him to depart will intensify. A no-confidence motion could be brought by the opposition this week.
While markets would welcome Berlusconi's departure, it may cause further political uncertainty. The center-right may insist on early elections, which would delay reforms for weeks or months -- time the euro zone doesn't have.
spiegel.de
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