Italians gripped by rumours of contagion



With the spectre of a default looming over Greece, the realisation that Italy is next in line for debt meltdown threw Silvio Berlusconi's government into panic and disarray yesterday.

As the Italian premier flew to the G20 summit in Cannes, his fractured cabinet continued to bicker after failing to agree measures to slash debt and satisfy sceptical speculators, while new parliamentary rebels threatened to sink his fragile coalition.

There had been rumours that an emergency cabinet meeting late on Wednesday night would produce “drastic measures”, including a wealth tax on the rich, to shore up Italy’s coffers. But an emergency decree needed to force such measures through was rejected, principally by Mr Berlusconi's cabinet nemesis, the Finance Minister, Giulio Tremonti, according to press reports.

The meeting even failed to produce details on key measures to liberalise the economy and reform pensions that had been pledged to the EU last week.

Francesco Giavazzi, professor of economics at Milan's Bocconi business school, said: "This is a very, very bad sign. Berlusconi went to Cannes with nothing... I don't think the government can last more than a few days."

But Mr Berlusconi has rejected a growing chorus of calls to step aside from the centre-left opposition, leading business figures, the Catholic Church and even centre-right rebels.

The cabinet's inability on Monday night to agree on existing pledges – to liberalise employment laws and sell state assets – and enforce extra ones by means of a decree led one cabinet minister, the outspoken Northern League member Roberto Calderoli, to tell reporters: "I'm totally disappointed."

A government source said yesterday afternoon that Mr Berlusconi would tell EU partners at the G20 summit that he planned to use confidence votes to ensure that the less radical methods for cutting debt and boosting growth were passed within 15 days as part of an amendment to a budget bill already before the Senate. But last night news broke that six members of his PDL party were threatening to defect. All six signed a letter to Mr Berlusconi saying they would no longer support his wafer-thin majority in parliament if he did not seek to build a national unity government.

"You are aware, as is each of us, that the current government does not have the consensus in parliament to achieve the difficult agenda of commitments taken in front of European institutions, the parliament and the Italian people," the six wrote.

By yesterday evening it was reported that two more PDL MPs had defected to the centrist CDC party. Mr Berlusconi's key coalition ally, Umberto Bossi, head of the Northern League, quickly dismissed the notion of a make-shift administration, saying he would prefer fresh elections. This political uncertainty added to the markets' nervousness, already exacerbated by the tensions between Mr Berlusconi and his Finance Minister. As a result, Italy is having to pay ever higher yields to service its national debt, which stands at about 120 per cent of GDP.

Sillvio's love songs strike the wrong chord

Popular music is the latest loser – or winner, depending on your point of view – in Europe's debt crisis. And once again Silvio Berlusconi is in the thick of things, after it emerged that the former cruise ship crooner's latest album had been put on hold owing to Italy's problems.True Love, with words by Mr Berlusconi and music by the guitarist Mariano Apicella, was due out in September but has now been rescheduled for 22 November, La Stampa reported. Mr Berlusconi has said that his days on cruise ships taught him all he knows about working a crowd. It probably taught him, too, the importance of timing, and with his poll ratings at 22 per cent, now might not be the moment to release CD number four.

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