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FACTDROP: Italy struggles to replace Berlusconi


Italy struggles to replace Berlusconi

Πηγή: tvnz
By Reuters
Nov 10 2011

Italian politicians are scrambling to find a replacement for departing Prime Minister Silvio Berlusconi and head off the risk the country could become the next and biggest euro zone casualty.

President Giorgio Napolitano tried in vain to calm markets after Italy's borrowing costs reached levels that could close its access to market funding, a development which would threaten the future of the euro zone.

Napolitano gave assurances the controversial Berlusconi would honour his pledge to step down after parliament approved reforms geared to placate markets. He would then waste no time in either appointing a new government or calling new elections, he said.

It may already be too late to turn the markets around as the borrowing costs of the euro zone's third biggest economy has risen for days to run past levels which forced Ireland and Greece to seek bailouts.

"What matters most to investors is not who replaces Berlusconi or the next government's commitment to reforms, but whether euro zone policy-makers will finally put in place a credible and durable backstop to Italian debt," said head of debt consultancy Spiro Sovereign Strategy Nicholas Spriro.

Napolitano appointed former European Commissioner Mario Monti as a senator for life, a move which many Italian commentators interpreted as a sign he would ask Monti to try to form a government of technocrats as soon as Berlusconi goes.

Italy's main business and banking associations called for a "government of national unity, with broad, cross-party support".

Monti, a respected economist, has long been cited as the most likely leader of this kind of unelected executive, which has been tried with success in Italy in the past and would aim to pass the vital, market-friendly reforms.

Lower House Speaker Gianfranco Fini said parliament would pass the reforms by Sunday aimed at boosting growth and shoring up public finances in a so-called "maxi amendment" to the 2012 budget currently before parliament.

Those reforms, which Berlusconi promised to Italy's increasingly worried partners last month, will be the government's last piece of business before the prime minister tenders his resignation.

The secretary of Berlusconi's People of Freedom party, Angelino Alfano, said on television that Berlusconi would resign "between Saturday and Monday".

Despite being the subject of intense political haggling for weeks, the details of the maxi-amendment remain sketchy.

Economy Minister Giulio Tremonti denied on Wednesday that the package would include steps to ease firing restrictions, a move which would be welcomed by markets but would be fiercely contested by trade unions and the leftist opposition.

Measures that will feature will aim to open up the professions, reduce bureaucracy and sell off public real estate, government officials have said.

The European Commission has called on Italy to adopt more steps to ensure that its promise to balanced its budget by 2013 will be achieved.


Policymakers outside the euro area kept up pressure for more decisive action to stop the crisis spreading.

Christine Lagarde, head of the International Monetary Fund, told a financial forum in Beijing that Europe's debt crisis risked plunging the global economy into a Japan-style "lost decade".

"If we do not act boldly and if we do not act together, the economy around the world runs the risk of downward spiral of uncertainty, financial instability and potential collapse of global demand."

Berlusconi has reluctantly conceded that the IMF can oversee Italian reform efforts.

Euro zone finance ministers agreed on Monday on a road map for leveraging the 17-nation currency bloc's 440-billion-euro ($US600 billion) rescue fund to shield larger economies like Italy and Spain from a possible Greek default.

But there are doubts about the efficacy of those complex plans, and with Italy's debt totalling around 1.9 trillion euros even a larger bailout fund could struggle to cope.

Lagarde said she was hopeful the technical details on boosting the European Financial Stability Fund (EFSF) to around 1 trillion euros would be ready by December.

Many outside Europe are calling on the ECB to take a more active role as other major central banks do in acting as lender of last resort. German opposition to that remains implacable, seeing it as a threat to the central bank's independence.

"The ECB will be drawn like everyone else by the weight of gravity (to act)," one euro zone official said.

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