November 6, 2011 6:36 pm

Berlusconi fights to stave off party revolt

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Time appears to be running out for Silvio Berlusconi’s centre-right government amid speculation that Italy’s prime minister could be forced to resign within weeks or even days despite his insistence that he has the support in parliament to fight on.

Against this backdrop of deep political uncertainty, officials are anxiously awaiting the opening of markets on Monday following a sharp rise to euro-era highs of Italy’s bond yields on Friday because of disappointment with the inconclusive outcome of the G20 summit in Cannes.

“On the edge of the abyss,” Il Sole 24 Ore, Italy’s leading business daily, declared in a headline, lamenting the country’s loss of credibility exposed at the summit.

Since his return from Cannes on Friday night, Mr Berlusconi has been lobbying dissidents in his party not to “betray” their ruling coalition, threatening political oblivion to those who are considering joining the opposition.

Responding to reports that about a score of his MPs were set to desert him, Mr Berlusconi told a party rally on Sunday that he had checked the numbers “in the last few hours” and that he was confident he still had a majority in parliament to move ahead with economic reforms pledged at last month’s eurozone summit in Brussels.

Mr Berlusconi is also under intense external pressure to end months of procrastination over structural reforms and measures to cut Italy’s €1,900bn ($2,600bn) public debt. A delegation from the European Commission is expected in Rome on Wednesday to monitor Italy’s progress, and David Lipton, deputy head of the International Monetary Fund, is preparing to be in Rome next Monday.

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While Mr Berlusconi is fighting to avoid his government being replaced by an emergency interim administration led by unelected technocrats, commentators say that Italian economic policy is being dictated anyway by the unelected triumvirate of the European Central Bank, the European Commission and the IMF.

Despite Mr Berlusconi’s characteristic defiance, officials said party leaders might succeed in persuading him to step down before losing a vital parliamentary vote. Mr Berlusconi dismissed such talk on Saturday as “palace chitter-chatter”.

In such an event, Mr Berlusconi might manage to designate a successor from within his People of Liberty party, with Gianni Letta, cabinet under-secretary and long-time aide, considered his first candidate. Giulio Tremonti, finance minister who has been at odds with Mr Berlusconi for months, could be Mr Letta’s choice of deputy prime minister in charge of the economy to build on what officials say is a relationship of trust with Brussels.

Throwing down his own challenge to the prime minister, Pierluigi Bersani, head of the main opposition Democratic party, said on Sunday he was considering calling a vote of no confidence in the government.

Mr Bersani did not set a date. On Tuesday, the lower house is to vote on the 2010 state accounts, a motion that the government lost last month by one vote when several MPs failed to show up. Some in the opposition argue that this would not be the appropriate moment to try to bring down the government as failure to pass the 2010 accounts would throw the whole machinery of the state into chaos by putting a block on spending.

Mr Berlusconi is using the threat of snap elections in January, with the prospect of a heavy defeat, to whip party rebels into line.

Opposition leaders also appear keen to avoid elections in the midst of a sovereign debt crisis. Centrist and centre-left parties are unable to agree to find common ground over the reforms demanded by the international community.

The grassroots mood at a Democratic party rally in central Rome on Saturday was clearly hostile to the threat of job redundancies and other “sacrifices” imposed from outside.

“Sacrifices have to be made by those who have evaded taxes for years, not by the workers,” said one young woman.

Acknowledging the pressure, Mr Bersani told the crowd: “If sacrifices have to be made then they should be our decisions.”

In private, opposite politicians concede they would rather let Mario Monti, former European Commissioner, head a government of technocrats that would have to impose such unpopular decisions before elections scheduled for early 2013.

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