ITALIAN PREMIER Silvio Berlusconi last night defiantly spurned calls for his resignation as he faced record borrowing costs and reports of the defection of more than 30 deputies in his People of Freedom party.
The current health of Mr Berlusconi’s embattled centre-right coalition will be tested today when parliament is expected to ratify the 2010 public accounts. Opposition forces may yet abstain but they remain adamant that Mr Berlusconi should resign or that his own party should call on him to leave. “It’s up to the government majority to make the move that will bring about a change. Today’s problem is that Berlusconi totally lacks credibility,” said senior opposition figure Francesco Rutelli, a former mayor of Rome.
“Every day he stays in power costs us 50 points on the spread.” Mr Rutelli’s comments came after another tumultuous day on markets in which the interest rate on 10-year Italian bonds touched another high of 6.6 per cent.
Analysts argue such rates are unsustainable as Italy needs to raise some €300 billion in the next year to refinance existing debt. The turmoil has led to anxiety about the fate of Italy, as officials speak privately of the need to prevent the debt crisis turning to “disaster”.
EU economics commissioner Olli Rehn said Europe still wanted Rome to elaborate on the contentious new austerity plan which has deepened the divisions within the Berlusconi administration. After euro zone ministers met last night in Brussels, he said the European Commission would send inspectors to Rome today or tomorrow. “I have signed a questionnaire last week and we expect that the Italian government will respond to these very specific questions concerning the implementation of the programme by the end of this week,” Mr Rehn told reporters.
“For Italy it is now crucial to implement the fiscal policies as outlined in the letter of the prime minister and accelerate structural reforms in order to boost growth and job creation.” Confirmation that Mr Berlusconi himself represented a major problem for the markets was underlined by a strange sequence of events yesterday morning.
Journalist and former Berlusconi cabinet minister Giuliano Ferrara triggered an immediate positive reaction on bond markets with interest spreads beginning to fall when he declared in an interview that Mr Berlusconi would resign “in a few hours”. Mr Berlusconi denied that speculation, after which Italian bonds immediately lost ground and interest spreads began to rise again.
True to his nature, Mr Berlusconi issued an eve of battle declaration in which he expressed his incredulity about how reports of his resignation had “got around”.
He now plans a confidence vote next week on the austerity plan. “I’m not resigning ... I want to look those people in the eye who would betray me.” A senior figure in Mr Berlusconi’s coalition partner, the Northern League, acknowledged that the government might fall.
Interior minister Roberto Maroni said the Berlusconi administration could be followed by a short term institutional government rather than an early election, an outcome much preferred by Mr Berlusconi.
Commentators say such a government might be led by former European commissioner Mario Monti.
Day-long talks in Athens on the formation of emergency coalition to run Greece broke up without a deal to nominate a new prime minister to succeed George Papandreou.
Euro zone ministers said they would release a crucial €8 billion emergency loan to Greece later this month if the coalition parties sign letters pledging to execute the EU-IMF bailout plan in its entirety.