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
News
Ben Little, right, is a Labour supporter while Jonathan Rogers supports the Green Party
general election 2015
News
The 91st Hakone Ekiden Qualifier at Showa Kinen Park, Tokyo, 2014
news
Life and Style
Former helicopter pilot Major Tim Peake will become the first UK astronaut in space for over 20 years
food + drinkNothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
News
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
ebooks
ebooksA special investigation by Andy McSmith
Sport
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
football
Life and Style
health
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
Life and Style
Buyers of secondhand cars are searching out shades last seen in cop show ‘The Sweeney’
motoringFlares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
  • Get to the point
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

Recruitment Genius: Project Implementation Executive

£18000 - £23000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Chiropractic Assistant

£16500 per annum: Recruitment Genius: A Chiropractic Assistant is needed in a ...

Recruitment Genius: Digital Account Executive - Midlands

£18000 - £26000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Web Developer

£28000 - £30000 per annum: Recruitment Genius: This company provides coaching ...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own