Return of Berlusconi follows resignation of Mario to throw stock markets into turmoil

 

The spectre of another Berlusconi premiership panicked the financial markets today and saw Italy and the euro staring into the abyss again.

Within hours of opening, Milan's stock exchange had fallen nearly four per cent and Italy's borrowing costs shot up as markets tried to make sense of the chaotic political scene following Prime Minister Mario Monti's announcement at the weekend that he plans to resign. By close, Italy's main FTSE MIB stock index had fallen 2.2 per cent to 15,354.

"The underlying cracks within the eurozone are actually widening," Georg Grodzki, an analyst with Legal & General Investment Management in London, said. "Investors will be reading Italian politicians' lips very, very closely."

Mr Monti insisted he was not considering running for office in elections early next year, despite building speculation that he was planning to continue in government in some capacity. Mr Monti said on Saturday that he planned to step down after passing the 2013 budget.

"I am not considering this particular issue at this stage," Mr Monti, 69, said at a press conference in Oslo, where he joined other European Union leaders to pick up the Nobel Peace Prize. "All my efforts are being devoted to the completion of the remaining time of the current government, which appears to be a rather short time, but still requires an intensive application of my energies."

La Stampa newspaper had speculated he might attempt to form a new grouping in the political centre in an effort to continue his reforms, which have stabilised Italy's finances since he took over from Silvio Berlusconi's collapsing government 13 months ago. Other pundits have predicted that he will endorse another political grouping that backs his reforms or seek a high-profile position – perhaps economics minister in a centre-left government.

Today the ex-premier Mr Berlusconi – whose party prompted the current crisis by withdrawing its support in two votes last week – was attempting to mend ties with the anti-immigration Northern League, whose support he would desperately need in a centre-right coalition.

Over the past few months the 76-year-old media mogul has stepped up his populist attacks against the EU, Germany and austerity measures. Senior figures in Europe warned that Mr Monti's policies had to continue to avert the return of the crisis that brought him to power a year ago. Only then would a Greek-style collapse be averted, they said.

"Monti was a great Prime Minister of Italy and I hope that the policies he put in place will continue after the elections," European Council President Herman Van Rompuy said in Oslo.

The Spanish Finance Minister, Luis de Guindos, said that instability in Italy could spill over and put further strain on Spain's already-fragile public finances.

Yields on 10-year Spanish bonds also jumped on the news out of Italy, a sign of nerves among investors. "Everytime there are doubts … for example today, when there are uncertainties about the political stability of a neighbouring country such as Italy, that immediately affects us," Mr de Guindos said in an interview with Spanish state radio.

Mr Berlusconi's centre-right PDL (People of Freedom) party, which until last week appeared to be in a state of disintegration, has shown some signs of revival with the news that Mr Berlusconi will lead it in the February election.

But with the PDL lagging so far behind in the polls – it has just 18 per cent against the centre-left Democratic Party's 38 per cent – the tycoon's chances of winning a fourth election appear marginal at best.

The Democratic Party leader, Pierluigi Bersani, has stressed that he would stick to the Monti reforms introduced thus far.

Mr Berlusconi's best bet appears to be concentrating his forces on traditional centre-right strongholds such as Lombardy and Sicily in order to secure a majority in the Senate in the likely event of him losing the poll.

Meanwhile, a front-page editorial in the leading Corriere della Sera newspaper lamented that the period of relative calm brought by Mr Monti had lasted just 13 months, and the battle between pro and anti-Berlusconi forces was set to resume. "The war continues," the newspaper said. "The world looks at us, incredulous."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs General

Belong: Volunteer Mentor for Offenders

This is a volunteer role with paid expenses : Belong: Seeking volunteers who c...

Recruitment Genius: Operations Manager

£18000 - £22000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Operations Manager

£18000 - £22000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Apprentice Telesales & Marketing Opportunities

£10400 - £14000 per annum: Recruitment Genius: Are you outgoing, ambitious, en...

Day In a Page

Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent
Markus Persson: If being that rich is so bad, why not just give it all away?

That's a bit rich

The billionaire inventor of computer game Minecraft says he is bored, lonely and isolated by his vast wealth. If it’s that bad, says Simon Kelner, why not just give it all away?
Euro 2016: Chris Coleman on course to end half a century of hurt for Wales

Coleman on course to end half a century of hurt for Wales

Wales last qualified for major tournament in 1958 but after several near misses the current crop can book place at Euro 2016 and end all the indifference
Rugby World Cup 2015: The tournament's forgotten XV

Forgotten XV of the rugby World Cup

Now the squads are out, Chris Hewett picks a side of stars who missed the cut
A groundbreaking study of 'Britain's Atlantis' long buried at the bottom of the North Sea could revolutionise how we see our prehistoric past

Britain's Atlantis

Scientific study beneath North Sea could revolutionise how we see the past
The Queen has 'done and said nothing that anybody will remember,' says Starkey

The Queen has 'done and said nothing that anybody will remember'

David Starkey's assessment
Oliver Sacks said his life has been 'an enormous privilege and adventure'

'An enormous privilege and adventure'

Oliver Sacks writing about his life
'Gibraltar is British, and it is going to stay British forever'

'Gibraltar is British, and it is going to stay British forever'

The Rock's Chief Minister hits back at Spanish government's 'lies'
Britain is still addicted to 'dirty coal'

Britain still addicted to 'dirty' coal

Biggest energy suppliers are more dependent on fossil fuel than a decade ago
Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

Orthorexia nervosa

How becoming obsessed with healthy eating can lead to malnutrition
Lady Chatterley is not obscene, says TV director

Lady Chatterley’s Lover

Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
Farmers in tropical forests are training ants to kill off bigger pests

Set a pest to catch a pest

Farmers in tropical forests are training ants to kill off bigger pests