As Italy debt crisis mounts, attention turns to ousting Berlusconi (video)

Prime Minister Silvio Berlusconi is blamed for fostering the conditions that have led to a severe debt crisis in Italy – and for being unable to promote reform. Even party stalwarts are turning against him. 

Alessandro Bianchi/Reuters
Italian Prime Minister Silvio Berlusconi attends a meeting with European Commission President Jose Manuel Barroso at Chigi palace in Rome in this March 14 file photo. Berlusconi, under huge pressure from international markets and rebels in his party, tried to play his last cards on Monday to hang on to power and denied reports that he could resign within hours.

When rumors spread that Prime Minister Silvio Berlusconi was to resign “within hours,” on late Monday morning, Italy's stock exchange suddenly gained 3 percent. But when a close aide of Mr. Berlusconi's denied the rumors, enthusiasm faded quickly, and by 1 p.m., the stock exchange had given up 1 percent of that gain.

The reactions at Milan's stock exchange (see graph here) reflect the growing discontent, both at home and abroad, over Mr. Berlusconi's ability to handle a financial crisis that might drag the whole eurozone down with Italy.

Italy is now facing one the most severe economic crises in the eurozone, triggered by the nation's huge public debt and by its lack of productivity growth in the past 15 years. Markets fear the country might eventually go bankrupt under the weight of its public debt, now close to 120 percent of GDP. An Italian bankruptcy would threaten the whole eurozone, as it is unclear if the European Union would be able to bail out the debt. 

Berlusconi, who has been leading Italy on and off since 1994, is largely blamed both for having created the conditions that led to the crisis and for his inability to respond once it erupted. But unlike the leaders of other countries in southern Europe facing similar difficulties – Spain's José Zapatero and Greece's George Papandreou – Berlusconi seems unwilling to leave his job. He is expected to face a confidence vote in the parliament on Tuesday that analysts say he has a chance of surviving by a slim majority.

“Even if Berlusconi survives the confidence vote, the very day after, he will have to introduce tough economic reforms, which he is not able to,” says David Bidussa, a historian at Istituto Feltrinelli, a progressive think tank. “How much of the current crisis can be blamed on Berlusconi is subject to debate, but recent facts demonstrate he is not able to make the necessary reforms to get out of it.

“For two decades, he has built his political identity indulging Italians' worst habit: to evade taxes,” says the historian, recalling how Berlusconi has told citizens that the state rips them off and that evading taxation is acceptable. “But now the obvious priority is to cut Italy's huge debt, which means more taxation. Berlusconi cannot do such a thing, it's just against his nature.”

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Bidussa also noted that until recently, Berlusconi has always denied even the existence of an economic crisis: “For decades he had been the man of the dream. Now, how can he be the one to face such a harsh reality?”

Berlusconi has repeatedly vowed to pass a vast series of reforms aimed at lowering public spending, and thus the debt – but he has succeeded in accomplishing only a few of his promises, as his shaky ruling coalition is deeply divided on economic issues.

The European Central Bank has come to its rescue buying tens of billions of euros in Italian bonds in the last three months. When the European Union urged Berlusconi to introduce a set of austerity measures last month, all that he could do was bring a letter of intent which even his own finance minister, Giulio Tremonti, refused to sign. As a result, his already struggling international credibility has suffered a further blow.

European leaders make no secret of their lack of confidence. During a joint press conference in late October, French President Nicolas Sarkozy and German Chancellor Angela Merkel smirked at a reporter who had asked them if they trusted Berlusconi's recovery plan, spurring a wave of laughter among the journalists attending the event.

Now growing segments of Berlusconi's own governing coalition believe his international reputation poses a serious obstacle in Italy's attempt to rebuild its economic credibility. Calls for Berlusconi to resign have come from senior members of his own Freedom Party. “He should step aside,” said senior lawmaker Claudio Scajola on Sunday.

According to news reports, even Mr. Tremonti, Berlusconi's finance minister, is privately asking him to quit. During a joint press conference with the prime minister last week, Tremonti refused to comment after a reporter asked him whether he thought his boss should resign – in front of a much embarrassed Berlusconi.

“It seems like the Freedom Party is ready to get rid of his leader,” says Bidossa. “I wonder however if its members, who were all appointed by Berlusconi in a top-down approach, hold the political vision to rule without him.”

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