Italy: Details of Berlusconi succession still in doubt

MPs resist President's plan to install technocrat caretaker prime minister

The fate of the euro appeared to rest on the shoulders of Italy's squabbling MPs last night, with President Giorgio Napolitano's plans to install a technocrat government winning market support, but encountering fierce parliamentary resistance.

The realisation that Italy was heading rapidly towards bankruptcy had prompted all political parties to pledge that a stability law, containing economic reforms demanded by the EU, would be passed this weekend. But with this done, Silvio Berlusconi will stand down, leaving a dangerous political void that the head of state wants to fill rapidly to prevent further alarm on the money markets.

Borrowing costs eased yesterday on news that President Giorgio Napolitano had made the former EU competition commissioner Mario Monti a senator for life as a precursor to installing him as makeshift premier.

President Napolitano hopes a Monti-technocrat administration will pull Italy through the financial crisis. The plan even received Mr Berlusconi's backing yesterday morning, with him wishing Mr Monti "fruitful work in the country's interest".

But the plans were on a knife-edge last night as two parliamentary parties and leading members of Mr Berlusconi's coalition said they would not back the technocrat administration.

The Northern League and the Italy of Values Party said they wanted fresh elections. These calls were joined by several ministers from Mr Berlusconi's PDL party, including Mr Berlusconi's anointed heir, Angelino Alfano.

Mr Alfano and other senior PDL figures probably fear that a lengthy technocrat administration would lead to further splits in their centre-right power base, hence the preference for taking their chances at the polls.

The main opposition Democratic Party along with some PDL figures, including the Foreign Minister, Franco Frattini, were in favour of a Monti government, however. Mr Frattini said: "I would be careful about calling an immediate election, throwing the country into a three-month election campaign with soaring bond spreads and our rising debt. Saving Italy requires credibility and responsibility."

Professor James Walston of the American University in Rome said the level of support appeared some way short of the resounding majority Mr Monti might seek given his politically precarious position as an unelected official.

If President Napolitano succeeds in installing Mr Monti, he would probably call on non-political figures such as the Bank of Italy director Fabrizio Saccomanni along with centrist politicians and skilled fixers such as Mr Berlusconi's chief of staff Gianni Letta.

Its priority would be implementing the unpopular cuts and employment law reforms demanded by the EU.

Mr Monti, a tough negotiator with a record of taking on powerful corporate interests as European competition commissioner, made clear on Wednesday evening what his priorities would be. "Growth needs structural reforms and the cancellation of privileges and contributions from all sections of society," he said in reference to the corruption, nepotism, bureaucracy and tax evasion that have crushed Italy's economy for decades.