Crisis worsens in Italy, but defiant Silvio Berlusconi clings to power

view gallery VIEW GALLERY

A senior member of his government says it is 'pointless to persist', but last night the prime minister was still in place. Michael Day reports

The money markets called time on Silvio Berlusconi yesterday, rallying on rumours that the Italian leader's resignation was only days – or even hours – away.

Share prices surged and Italy's borrowing costs fell back briefly from "frighteningly high" levels after two prominent pundits, who are normally supportive of the prime minister, said he was on the verge of quitting. Their views were given credence by the Italian interior minister, Roberto Maroni, who said: "It seems there's no longer a majority, given the latest news [of parliamentary defections]", before adding that it was "pointless to persist".

But Mr Berlusconi confounded this burst of market optimism by saying he was going nowhere – and insisting that Italy needed him to stay in power until 2013. "The rumours of my resignation are without foundation and I don't understand how they're circulating," he said in the middle of the day on his Facebook page, in response to the claims – from the editor of Il Foglio and the deputy editor of Libero, two right-wing, pro-Berlusconi papers – that his resignation was just hours away.

Last night he made a defiant declaration that he would not go before today's Budget vote so he could see who from his own party was jumping ship. "I want to see face to face those who want to betray me," he said. At last week's G20 meeting in Cannes, Mr Berlusconi was compelled by world leaders, nervous that Italy could be on the brink of default, to invite the International Monetary Fund to monitor the country's national finances.

Other eurozone leaders heaped fresh pressure on Mr Berlusconi's tottering government yesterday to bring down its borrowing levels and enact economic reform.

"Italy has to stick to what has been announced," the German finance minister, Wolfgang Schauble, said. "If Italy will deliver; will reduce its debt, there is no problem." This tough message was reinforced by the EU economic affairs commissioner, Olli Rehn, who confirmed that he had sent a questionnaire to Rome asking the government to clarify what "concrete action plans" it had for cutting debt and the timeline for implementing them.

Eurozone finance ministers met in Brussels yesterday to discuss efforts to boost the firepower of the European bailout fund, known as the European Financial Stability Facility (EFSF). The German Chancellor, Angela Merkel, let slip in Cannes last Friday that plans to get other countries to invest in the EFSF had won no support among emerging market nations. The Russian finance minister, Sergei Lavrov, confirmed yesterday that his nations would only be interested in channelling support funds into Europe through the IMF.

Investors are panicking about Italy's €1.8 trillion (£1.5 trillion) debt mountain and the inability of Mr Berlusconi's lame duck administration to bring it down. These fears are causing the country's borrowing costs to soar. Before the rumours of a rapid Berlusconi exit spread, the yield for Italian 10-year bonds rose above 6.6 per cent, the highest rate since the introduction of the euro. If bond costs are too high for too long, Italy could be forced to default on its debts, spelling potential disaster for the euro, the European banking system and the global economy.

As Italy waited yesterday for signs that the 75-year-old premier might fall on his sword, many pundits said the first real test for his teetering coalition could come today, with the lower house of the legislature due to vote on a report passing last year's Budget. If Mr Berlusconi loses this vote, some members of his People of Freedom (PDL) party predict there will be a stampede for the door. Subsequent votes over the next 10 days to pass austerity measures demanded by the EU, or possibly a vote of no confidence proposed by the opposition, would then almost certainly finish off the government.

If this happened, President Giorgio Napolitano could consult with political parties to see if an alternative majority might be formed – perhaps a centre-right coalition led by a less-contentious member of Mr Berlusconi's party, or a group of centre-left parties.

But given the precarious financial situation, Mr Napolitano might opt for a technical, stop-gap administration government led by a non-political figure who would be charged with implementing the economic reforms and preparing the country for new elections.

Ireland's finance minister, Michael Noonan, said: "The proposals to leverage up the firewall protection of the EFSF are quite good proposals, but of course it will take time before the technical work is done to make that happen."

In case Mr Berlusconi had failed to interpret yesterday's market reaction to rumours of his imminent departure, financial analysts spelt it out for him.

Louise Cooper at BGC Partners said: "The leader and his country are in danger of taking the rest of Europe, if not the world, into economic hell."

The French foreign minister, Alain Juppé, said pointedly at the weekend that Italy had "a problem of credibility".

What next? the chances of Italian reform

Parliament loses confidence; new government formed

He loses a confidence vote within the coming days and head of state, President Giorgio Napolitano, steps in and asks the centrist and centre-right blocks in parliament to form a new government, with a less contentious figure, such as Senate leader, Renato Schifani, or cabinet undersecretary Gianni Letta as prime minister. This would give the vital austerity measures a chance of being implemented.

Berlusconi survives

Increasingly improbable, but Berlusconi might once again pull a rabbit out of the hat – and lure back enough defectors to keep his government afloat, for a few more months at least. Bad news for the euro.

Government of national unity

If the centre-right implodes, President Napolitano might try for a government of national unity with centre-left parties including the main opposition Democratic Party and centre-right rebels.

General elections

The Berlusconi government falls and President Napolitano fails to form an interim administration, and so the country heads for a general election, most likely in spring. This might bring with it more uncertainty – and more woes for the euro.

President ignores political parties and appoints interim PM

President Napolitano might try to put a technocrat, such as the former EU commissioner Mario Monti, into office, charged with leading a caretaker government to implement economic reforms demanded by the EU and to prepare the country for elections.

Suggested Topics
Voices
A Russian hunter at the Medved bear-hunting lodge in Siberia
Save the tigerWildlife charities turn to those who kill animals to help save them
News
Davis says: 'My career has been about filling a niche - there were fewer short actors and fewer roles – but now I'm being offered all kinds of things'
PeopleWarwick Davis on Ricky Gervais, Harry Potter and his perfect role
News
i100
Sport
Frank Lampard will pass Billy Wright and equal Bobby Charton’s caps tally of 106 caps against
sportFormer Chelsea midfielder in Etihad stopgap before New York contract
PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
The first film introduced Daniel Radcliffe to our screens, pictured here as he prepares to board the train to Hogwarts for the first time.
booksHow reading Harry Potter helps children grow up to be gay-friendly
Arts and Entertainment
A scene from Aladdin is performed at the Tony Awards in New York in June
theatreBrit producer Lythgoe makes kids' musical comedy a Los Angeles hit
Sport
Usain Bolt of Jamaica smiles and shakes hands with a competitor after Jamaica won their first heat in the men's 4x100m relay
sport
News
Chancellor George Osborne, along with the Prime Minister, have been 'complacently claiming the economy is now fixed', according to shadow Chancellor Ed Balls
i100... which is awkward, because he is their boss, after all
Life and Style
A small bag of the drug Ecstasy
Health
Life and Style
Floral-print swim shorts, £26, by Topman, topman.com; sunglasses, £215, by Paul Smith, mpaulsmith.co.uk
FashionBag yourself the perfect pair
News
news
News
Netherlands' goalkeeper Tim Krul fails to make a save from Costa Rica's midfielder Celso Borges during a penalty shoot-out in the quarter-final between Netherlands and Costa Rica during the 2014 FIFA World Cup
newsGoalkeepers suffer from 'gambler’s fallacy' during shoot-outs
News
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmReview: A week late, Secret Cinema arrives as interactive screening goes Back to the Future
Extras
indybest
News
i100
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

(Senior) IT Support Engineer - 1st-3rd Line Support

£40000 per annum: Ashdown Group: A successful IT service provider that has bee...

Wind Farm Civil Design Engineer

£55000 - £65000 Per Annum: The Green Recruitment Company: The Green Recruitmen...

Principal Marine Mechanical Engineer

£60000 - £70000 Per Annum: The Green Recruitment Company: The Green Recruitmen...

Principle Geotechnical Engineer

£55000 - £65000 Per Annum: The Green Recruitment Company: The Green Recruitmen...

Day In a Page

Save the Tiger: Meet the hunters tasked with protecting Russia's rare Amur tiger

Hunters protect Russia's rare Amur tiger

In an unusual move, wildlife charities have enlisted those who kill animals to help save them. Oliver Poole travels to Siberia to investigate
Transfers: How has your club fared in summer sales?

How has your club fared in summer sales?

Who have bagged the bargain buys and who have landed the giant turkeys
Warwick Davis: The British actor on Ricky Gervais, how the Harry Potter set became his office, and why he'd like to play a spy

'I'm a realist; I know how hard this business is'

Warwick Davis on Ricky Gervais, Harry Potter and his perfect role
The best swim shorts for men: Bag yourself the perfect pair and make a splash this summer

The best swim shorts for men

Bag yourself the perfect pair and make a splash this summer
Has Ukip’s Glastonbury branch really been possessed by the devil?

Has Ukip’s Glastonbury branch really been possessed by the devil?

Meet the couple blamed for bringing Lucifer into local politics
Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup