Minister's resignation adds to Italy's woe

'AT THE moment it looks like everything is against us . . . the economy, our finances, the stock market, the Mafia,' Italy's besieged Prime Minister, Giuliano Amato, said on Tuesday. Yesterday he received a further blow as his foreign minister resigned abruptly.

Mr Amato's hard-pressed government had earlier won a round in its battle to stay alive, but the departure of Vicenzo Scotti showed that it is still losing on points. The government's victory in a confidence vote, followed by support for its new budget package, means it can press ahead with its attempt to cut back on spending and bring some measure of order to state finances.

The 30,000bn lire ( pounds 14bn) package of spending cuts and tax increases will now go to the Senate. As well as the budget package, the government is demanding parliament give it special powers to legislate in key areas of public finances - state wages, pensions, health, and local government.

Mr Scotti was one of the political heavyweights in the cabinet, and an influential figure in the Christian Democrat Party. His departure came amid reports that he intends to pursue the leadership of the party, which suffered a massive setback in elections in April. He said that though he was leaving the government, he no longer wanted to resign his parliamentary seat, as had been required of Christian Democrat ministers. The Foreign Trade Minister, Claudio Vitalone, also asked the Senate to suspend his resignation from the chamber, and was expected to resign from the cabinet.

Mr Amato is faced with immense challenges. His month-old government, formed after a lengthy period of uncertainty, is itself the result of voters' dissatisfaction with the political system. A corruption scandal that affects every level of the Socialist Party is still rumbling, and the murder of an anti- Mafia judge, Paolo Borsellino, last week has touched off an explosion of discontent over the influence of organised crime.

The longer-term crisis that Italy faces in tackling its economic problems has yet to hit the country. It has a budget deficit of nearly 11 per cent of Gross Domestic Product. If it is to join other EC states in forming a single currency, it will have to reduce that to 3 per cent in the next five years.

The economic pain of taking that step would be enormous; but the prospects if Italy does not are bleak. Financial markets have already put pressure on the lire and reduced stock market values to seven-year lows. 'We need to regain credibility . . . we have lost so much of it,' Mr Amato said.

The lack of success in tackling the Mafia is also draining confidence. After Borsellino was murdered in Sicily, the government sent 7,000 troops to the island. Within hours the bloody response was delivered: the head of the anti-racketeering squad in Catania, Sicily's second city, was assassinated. Yesterday, police were searching houses and had set up roadblocks in an effort to find the killers of Giovanni Lizzio, who was investigating extortion of merchants and businessmen in eastern Sicily, an area previously beyond the mob's control.