Silvio Berlusconi: Should he go or should he go?

Italy’s Prime Minister Silvio Berlusconi’s resignation has become a question of when, not if, after his majority in Parliament was thrown into doubt by deserting MPs who say crippling debt isn’t Italy’s problem—he is.

As formerly loyal supporters in Rome jumped ship on Thursday, the beleaguered prime minister flew to Cannes to convince EU leaders at the G20 conference that an economic stimulus package he hastily put together the night before was enough to relaunch the moribund Italian economy.

During talks to thrash out his reform package on Wednesday, Treasury Minister Giulio Tremonti reportedly told Berlusconi that he was Italy’s real problem. “The events of the last few months and his incomprehensible behaviour in the eyes of the world mean that the prime minister is no longer trusted,” added Berlusconi’s former ally, Gianfranco Fini.

Regaining the trust of investors will be key in 2012 as the Italian government is expected to issue around €250-billion worth of bonds.

Berlusconi said that his stimulus measures—which include incentives for firms to hire women and young applicants, tax breaks for infrastructure companies and the sell-off of state property—would be put to a vote of confidence in the Italian senate within 10 to 15 days.

But the package fell short of the full mandate Berlusconi had hoped to take to the G20 after President Giorgio Napolitano reportedly advised the prime minister to put the reforms to a parliamentary vote.

Yields on Italian government bonds meanwhile stayed above 6% as markets continued to view Italy as the next weak link in Europe thanks to its massive €1.9-trillion public debt and crumbling coalition government led by a premier who faces three trials for fraud and paying an underage prostitute for sex.

Six former Berlusconi loyalist MPs wrote to the prime minister on Wednesday demanding “a new government”, while even Maurizio Paniz, a lawyer and MP who has doggedly defended Berlusconi, suggested that Cabinet secretary Gianni Letta could take over from him. Two further MPs then switched sides to the centrist UDC party on Thursday, and a third, Pippo Gianni, said there was “an 80% chance I will vote against the anti-crisis measures in a confidence vote”.

That left the prime minister facing possible defeat in the lower house in the coming days, after he scraped through 316 to 301 in a confidence vote last month.
Berlusconi managed to coax back some MPs who defected along with his former ally Fini last year—with some receiving government posts—but new unruly factions have since emerged in his People of Freedom party.

“If you add up the defections, he does not appear to have a majority any more,” said Roberto d’Alimonte, a professor of politics at LUISS university in Rome.

“But I don’t see a majority emerging to back a technical government which could be appointed by Napolitano. You would need Berlusconi’s support to get a viable majority for that and he won’t give it,” he said.

“More likely we will get early elections with a caretaker government until then.”

Giuliano Ferrara, a journalist and Berlusconi loyalist, said he was betting on a January election.

A paradox of the current crisis is that Berlusconi has held his majority together while passing savage spending cuts this summer to bring down Italy’s budget deficit, yet has stumbled as he attempts the apparently easier task of liberalising the Italian economy to promote growth, a move demanded by the European Central Bank in return for buying Italian bonds.

Berlusconi has shied away from tackling the professional guilds, retailers’ groups and unions which protect professions from competition, restrict shop opening hours and put labour reforms out of reach.

But one analyst said it would be foolish to expect any tough economic reforms if Italy’s centre left return to power. “The opposition is divided on economic measures. I’d really like to see the left try to reform Italy’s labour market and pension system,” said Alessandro Campi, a professor of political science at Perugia university.—

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