IMF in Rome to monitor austerity plan

 

ITALY:THE CRISIS engulfing Italian prime minister Silvio Berlusconi intensified as International Monetary Fund inspectors were called to Rome to monitor his new austerity plan and some of his own ministers raised doubt as to whether he could survive for much longer.

Mr Berlusconi and a succession of global leaders insisted the IMF’s arrival was at his government’s invitation. But the intervention reflects a growing lack of confidence in the Italian leader, who is beset with sex scandals, court cases and deepening divisions within his own administration.

The decision to send IMF officials to monitor the budget came during talks late on Thursday night in Cannes between Mr Berlusconi and European leaders including German chancellor Angela Merkel and French president Nicolas Sarkozy. US president Barack Obama and IMF managing director Christine Lagarde also attended.

The meeting was Mr Berlusconi’s second with euro-zone chiefs in less than a day. With the G20 summit dominated by the expanding crisis in the euro zone, he is under mounting pressure to damp down a big spike in Italy’s borrowing costs. “Italy has agreed a monitoring programme with the IMF. In fact, it invited it,” Mr Obama said.

The interest rate on Italian 10-year bonds hit a new record of 6.43 per cent yesterday, bringing the country closer to levels at which it would be unable to refinance its national debt.

The European Central Bank has been buying the country’s sovereign bonds since August in an increasingly difficult effort to keep its borrowing costs under control.

Such pressure on Italy, the third-largest euro-zone economy, has triggered high anxiety among other European leaders as their bailout fund remains too small to cope with an aid plan for the country and any rescue effort could overwhelm the euro zone.

Mr Berlusconi again rejected calls to resign yesterday and said he had turned down an offer of financial aid from the IMF. “We have thanked them and said we didn’t need those funds.”

The tension in his administration was evident in Cannes as his finance minister, Giulio Tremonti, declined to provide a direct response to the question of whether Mr Berlusconi could continue.

On Italian television, defence ministry undersecretary Guido Crosetto provided a vivid illustration of the strains on the government. A Berlusconi loyalist, he said the outlook for the administration was not good. “I don’t know how many days or weeks the government has left. Certainly a majority relying on a few votes cannot continue for long.”

The prime minister insisted he would stay on. “We have a majority which I continue to believe is solid and so we will continue to govern.”

Neither the French president nor Ms Lagarde made any effort to gloss over the credibility problem with the Italian austerity package, over which Mr Berlusconi’s government has wavered for weeks.

“Berlusconi is conscious of the doubts that surround his plan,” Mr Sarkozy said.

Ms Lagarde was similarly forthright. “The problem that is at stake and that was clearly identified both by the Italian authorities and by its partners is a lack of credibility of the measures that are announced,” she told reporters.

“We will be checking the implementation of the commitments that have been made by Italy . . . to the members of the euro zone a couple of weeks ago.”