Berlusconi government close to disintegration

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The Independent Online
The Italian government of Prime Minister Silvio Berlusconi was disintegrating amid confusion and farce last night as ministers and senior officials competed to announce its dissolution.

One cabinet minister, Giuseppe Tatarella, said the government would resign today. Another, Giuliano Ferrara, said Mr Berlusconi would present a motion of confidence to parliament and resign if he failed to win a majority. Finally, Mr Berlusconi's spokes m an, Jas Gawronski, said there were "two options" but Mr Berlusconi had not decided which to choose.

Whatever the method of its demise, the Berlusconi government, inaugurated amid promises of a free-market revolution last spring, was clearly finished. Undermined by corruption inquiries into Mr Berlusconi himself and fatally weakened by the defection of the federalist Northern League, the coalition had staggered on only long enough to enact the 1995 budget into law.

Even that legislation, which cleared its final hurdle yesterday, was but a pale reflection of the reformist plans touted by Mr Berlusconi during his election campaign. The Treasury Minister, Lamberto Dini, unable to introduce real structural change, was forced to resort to the traditional revenue-raising squeeze adopted by Italian governments since the 1970s. It is intended to cut the state deficit by about £20bn.

Financial markets were expected to yield a quick and cruel verdict on the end of the Berlusconi interlude and the unstable period ahead, in which the only political certainty is that nothing is definite. The lira has already fallen to historic lows against the Deutschmark, while Italian government bonds were expected to ease. Equities have also suffered despite improved corporate earnings by the big northern Italian businesses. Most Italian commentators now expect there to be early general elections.

The main components of the fragmented Berlusconi coalition were the Prime Minister's own Forza Italia, the far-right National Alliance and the Northern League. But the League may now join small centrist parties in a new reformist alignment in Italian politics.