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Berlusconi Prepares a New Italian Drama

Summary:
Berlusconi Prepares a New Italian Drama A political storm brewing in Italy has the potential to disrupt the calm that has prevailed in the euro area. Europe’s leaders can only hope that markets will somehow prevent the currency union’s third-largest economy from backsliding too far on efforts to keep its debts under control. Former Prime Minister Silvio Berlusconi initiated the latest drama on Sept. 27, when he withdrew his support for the country’s coalition government. Five ministers from his People of Liberty, or PDL, party then resigned, prompting Prime Minister Enrico Letta to suggest a vote of confidence will be held this week. As a result, there’s a significant chance that Italy will find itself without a government at a time when it should be passing a budget for next year. Berlusconi’s stated rationale was that the coalition failed to scrap an increase in the value-added tax planned by the previous technocratic government. In reality, Berlusconi demanded his ministers resign to pre-empt his probable ouster from Parliament following his tax-fraud conviction. If we can count on one thing in Italy, it is for Berlusconi to always look out for Numero Uno. Whatever Berlusconi’s motivation, his demarche is almost certain to lead to new elections — the only real question is when.

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Berlusconi Prepares a New Italian Drama

A political storm brewing in Italy has the potential to disrupt the calm that has prevailed in the euro area.

Europe’s leaders can only hope that markets will somehow prevent the currency union’s third-largest economy from backsliding too far on efforts to keep its debts under control.

Former Prime Minister Silvio Berlusconi initiated the latest drama on Sept. 27, when he withdrew his support for the country’s coalition government. Five ministers from his People of Liberty, or PDL, party then resigned, prompting Prime Minister Enrico Letta to suggest a vote of confidence will be held this week. As a result, there’s a significant chance that Italy will find itself without a government at a time when it should be passing a budget for next year.

Berlusconi’s stated rationale was that the coalition failed to scrap an increase in the value-added tax planned by the previous technocratic government. In reality, Berlusconi demanded his ministers resign to pre-empt his probable ouster from Parliament following his tax-fraud conviction. If we can count on one thing in Italy, it is for Berlusconi to always look out for Numero Uno.

Whatever Berlusconi’s motivation, his demarche is almost certain to lead to new elections — the only real question is when. Letta has been scurrying to secure the support of enough PDL members to survive a confidence vote and keep his government going into next year. As of this evening, he appeared to be having some success: Senior PDL members were saying they didn’t want to topple the government.

To read the rest of this piece, please see the original posted on Bloomberg View.

Megan Greene
Megan Greene is the Chief Economist at Maverick Intelligence, with a particular focus on Europe. She is also a senior fellow at the Atlantic Council, a columnist with Bloomberg and a senior research fellow at Trinity College Dublin. The opinions expressed here are her own and do not reflect those of any employers. Ms Greene offers a strictly independent voice without a political or investment agenda.

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