Europe looked on anxiously at the political maelstrom engulfing Italy yesterday, after Prime Minister Silvio Berlusconi's pledge to quit as soon as vital austerity measures are passed.
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Sliding share prices and continued attacks on Italian bonds reflected the huge political uncertainty as the outgoing leader's fragile centre-right coalition attempted to speed up the legislation's tortuous progress through parliament, as demanded by European leaders.
A somewhat vague commitment on Tuesday night by the centre-left opposition to back the package of labour reforms and spending cuts, and the inability thus far of the ruling centre-right government to stick to EU deadlines, left question marks over Italy's ability to act decisively against the debt crisis.
Predicting how or when the vital reforms would be implemented was made more difficult by the ongoing political scramble as all parliamentary groupings sought to be in poll position when, as seems probable, the President Giorgio Napolitano attempts to form a new government later this month. "This is exactly what's scaring the markets," Franco Pavoncello, a politics professor at Rome's John Cabot University, said. "We really don't know what's going to happen in the next few days or weeks."
One Berlusconi loyalist, the Defence Minister Ignazio La Russa, said the government could deliver the promised stability law within 10 to 15 days. But he added it might take up to 30 days.
By yesterday evening, however, positive signs were emerging that the gravity of Italy's – and Europe's – situation was finally dawning on political leaders. Italian newswires said the Senate President, Renato Schifani, would announce this morning a commitment to passing the stability law by tomorrow, in the form of an amendment to existing budget legislation. Anna Finocchiaro, the main opposition Democratic Party's leader in the Senate, pledged that her party would seek to ensure it was approved "as quickly as possible".
The bill would still face the tougher challenge of passing the lower house where the government no longer has a majority. But even here there were more hopeful signs as the Democratic Party's leader in the lower chamber, Dario Franceschini, said his MPs were willing to work through the weekend to speed the bill's passage. "I think the penny's dropped," Professor Pavoncello said. "If they don't act in a matter of days then the country goes bankrupt."
Meanwhile, speculation continued over the fate of Mr Berlusconi. Most experts considered it extremely improbable he could seek to go back on his commitment. And Mr Napolitano said yesterday that Mr Berlusconi would be gone and the stability legislation passed "in a matter of days" and then Mr Berlusconi would then quit.
In an interview on his own Canale 5 TV station, the 75-year-old tycoon again championed Justice Minister Angelino Alfano as the man most likely to succeed him as head of his People of Freedom (PDL) party after what would be a "consultation among the 1.2 million party members". Much speculation centres on the possibility of an established centre-right figure such as Mr Alfano or Gianni Letta, Mr Berlusconi's current cabinet under-secretary, forming a new government. Some observers believe instead that Mr Napolitano will create a technocrat government, possibly led by the former EU commissioner Mario Monti.
End of an era, but some things never change
You're 24 hours away from a vote that will ultimately bring the curtain down on your three-decade political career, and the country you lead is on the brink of financial Armageddon. So you go out and party. Silvio Berlusconi decided to spend Monday evening in the company of Francesca Pascale, a 25-year-old TV presenter with whom the 75-year-old media tycoon has been romantically linked. She was seen arriving at his residence in Rome at close to midnight, and, according to media reports, was seen leaving on Tuesday morning.
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