Italian government on the brink

By Colleen Barry

Associated Press

Published: Tuesday, Oct. 25 2011 10:00 p.m. MDT

In this Thursday, Oct. 13, 2011 file photo, Italian Premier Silvio Berlusconi looks on after delivering his speech at the Lower Chamber, in Rome.

Associated Press

MILAN — The Italian government and a broad European plan to save the euro were both at risk on Tuesday, with Premier Silvio Berlusconi locked in a high-stakes battle with coalition partners to muster support for emergency growth measures demanded by the European Union.

Markets are looking to the EU's grand plan — promised in time for an EU summit on Wednesday — for a turnaround in the debt crisis that will avert a potential global recession.

But the plan risked being delayed, yet again, as governments failed to agree on details. Berlusconi's government, meanwhile, showed little sign of meeting the EU's demands for reforms, a prerequisite for the grand plan to go ahead.

The summit of EU leaders, meant to be a confidence-building day, risked going down as another failure in Europe's fight to stem its 2-year-long debt crisis.

EU officials say they will not present their comprehensive plan if Italy doesn't agree to new economic measures they demanded Sunday. But Berlusconi has been unable to get his key ally in parliament, the Northern League, to swallow an increase in the pension age. The Northern League says it will alienate its constituency of workers in the productive north.

Northern League leader Umberto Bossi conceded the government is at risk.

"Let's say the situation is difficult, very dangerous," he told reporters in Rome.

The head of Berlusconi's People of Freedom Party, Angelino Alfano, suggested Berlusconi's party had reached a deal with the Northern League — but no details were announced and the premier's office remained silent.

"We hope to have identified a point of balance with the League that allows us to give a response to the European Union also on pensions," Alfano said during the taping of an evening talk show, the news agency ANSA reported.

Berlusconi has survived scandals, court cases and dozens of confidence votes, but experts say the economic plan he needs to get approved will be one of the most critical tests yet of his grasp on the country's leadership.

"Berlusconi has an immovable object at home which is Bossi and the Northern League, and an unstoppable force abroad which is the European Union, so he's in a very, very difficult position," said James Walston, a political science professor at American University in Rome.

A Cabinet meeting to draft the emergency growth measures ended Monday evening in silence — a clear indication of discord within the government majority.

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.

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