Berlusconi’s coalition on verge of collapse

Europe
Threat of government collapse comes with Italy squeezed by eurozone partners over its $2.5 trillion debt pile

Italy’s coalition government, led by Silvio Berlusconi, could fall over plans to raise the retirement age [AFP]

Silvio Berlusconi, the Italian prime minister, is struggling to secure support for an emergency growth plan, which the EU wants within hours and which could cause the collapse of his coalition government.
The threat of a government breakdown comes as Italy takes centre stage in the eurozone crisis, with concerns mounting over its ability to keep from losing control over a $2.5 trillion debt pile and putting the entire bloc at risk.
Eurozone governments on Tuesday were trying to come up with a comprehensive plan to tackle their debt crisis by Wednesday. As part of that, they demanded late on Sunday that Italy draft new economic measures, arguing it would be pointless to protect the country from market turmoil if it didn’t pull its own weight.
The EU wants Italy to raise its standard pension age from 65 to 67, change the legal system to encourage investment and pass other reforms to improve growth.
Officials from EU governments have said they will not present their comprehensive plan, upon which global markets are pinning their hopes for the survival of the euro, if Italy doesn’t agree to new economic measures.

Berlusconi, mired in scandal and facing sliding approval ratings, has survived a series of confidence votes but analysts widely believe he cannot last much longer, with many expecting elections next spring.

‘Very dangerous’

Berlusconi has found little support within his own coalition. He faces resistance from his ally, the Northern League, a minority coalition party led by Umberto Bossi and without whose support his government would fall.

Bossi himself conceded that the government is at risk. “Let’s say the situation is difficult, very dangerous. This is
a dramatic moment,” he told reporters in Rome.

The Northern League, a regional party with a constituency that includes many small business owners and
pensioners, has been firmly opposed to raising the pension age. Bossi has been under pressure from grassroots supporters disillusioned with Berlusconi.

Eurozone partners like Germany are critical of the opposition. Germany is raising its pension age to 67 and Angela Merkel, the chancellor, will have a hard time explaining to voters why Europe’s largest economy should be ready to help countries whose workers retire earlier.

Perceived slights

A policy impasse this time could cost Berlusconi his power. The failure of Berlusconi’s majority in parliament to pass a routine measure earlier this month showed just how tenuous his hold on power had become.

Berlusconi has reacted angrily to pressure from Germany and France to enact reforms. He issued a statement on Monday declaring that no EU country was in a position to give lessons to its partners.

Perceived slights, such as a news conference in Brussels where Merkel and Nicholas Sarkozy, the French president, exchanged ironic smiles and laughter following a question about whether they were reassured after meeting Berlusconi, have caused some bitterness in Italy.

European Commission spokesman Amadeu Altafaj said the commission had no intention of humiliating Italy but needed
details on its reform plans.

‘Market trust’

Analysts in Italy have cautioned that the collapse of the ruling coalition could bring months of political deadlock until a new parliament is elected.

It would be up to Giorgio Napolitano, Italy’s president, to decide to retain Berlusconi in power pending new elections, or
install a technical government, which also would require the co-operation of parliament.

“I believe at this moment, a government crisis would be a disaster, because in the next months we have a huge quantity of debt that needs to be refinanced. A government crisis would destroy the market trust,” said Francesco Giavazzi, an economist at Milan’s Bocconi University.

---