Pressure mounts on Italy's Berlusconi to quit

By Victor L. Simpson

Associated Press

Published: Monday, Nov. 7 2011 7:45 a.m. MST

FILE - In this Nov. 27, 2010 file photo, Susanna Camusso, leader of Italy's largest labor confederation CGIL, arrives to deliver her speech during a demonstration to protest government policies regarding the economical crisis, in Rome. In an interview with The Associated Press Monday Nov. 7, 2011, Camusso is predicting 2012 will be a "terrifying" year for the economy even if beleaguered Premier Silvio Berlusconi leaves power soon. She also slammed Berlusconi's anti-crisis plan as containing virtually nothing to spark economic growth.

Pier Paolo Cito, File, Associated Press

Enlarge photo»

ROME — Pressure mounted on Premier Silvio Berlusconi to resign so a new government could pass the economic reforms Italy needs to avoid financial disaster, as the country's borrowing rates spiked Monday and talk of early elections intensified.

The premier denied persistent reports that he was considering stepping down, saying they were "without foundation."

Italy has become the new focus of the eurozone debt crisis as its debts are huge, its growth is slow, and its economy too large to bail out. Investors want the government to quickly pass measures to boost growth and cut debt, but Berlusconi's majority in parliament is weakening by the day.

There is growing concern that Berlusconi himself is the problem because he no longer commands enough loyalty in his own coalition to pass the reforms. His coalition government has suffered defections and the possibility of early elections is growing.

The ultimate fear is that Italy cannot pay for its enormous €1.9 trillion ($2.6 trillion) debt and needs international help. That is too expensive for Europe to handle, and could trigger a default that would break up the 17-nation eurozone and drag down the global economy.

During a G-20 summit last week, Berlusconi had to ask the International Monetary Fund to monitor the country's reform efforts, a humiliating step for the euro-zone's third largest economy.

On the bond markets, the yield on Italy's 10-year bonds jumped another 0.33 of a percentage point Monday to 6.58 percent, its highest level since the euro was established in 1999. That is drawing uncomfortably near the 7 percent threshold that forced both Ireland and Portugal to accept bailouts.

Berlusconi had lunch Monday with his children and friends at his villa near Milan, sparking Italian media to speculate he was devising an exit strategy. But the lunch is a long family tradition and his official Facebook page said "the reports of my resignations are without foundation."

Public administration minister Renato Brunetta, a Berlusconi loyalist, acknowledged Monday that the government has a "numbers problem" in parliament and if a majority is lacking then "everybody goes home." Interior Minister Roberto Maroni agreed, adding "it is useless to persist."

James Walston, professor of political science at the American University of Rome, said Berlusconi's time was quickly running out, even though elections are not due until 2013.

"He could go tomorrow. He could go next week. The sort of pressure that he is under, coming from his own people, will make it sooner than later," he said.

But Berlusconi has remained defiant, insisting he still commands enough support in Parliament. Only the loss of a confidence vote can force a government to resign.

"I don't understand how rumors of my resignation are circulating. They are lacking any foundation," Berlusconi was quoted on the daily Libero's website Monday.

Opposition leader Pierluigi Bersani says lawmakers are planning another confidence vote in Berlusconi's government. Political analysts say it could come as early as Tuesday when parliament is expected to approve the state's balance sheets — a routine measure that failed by one vote last month.

Others say should Berlusconi step down, he would seek to have his right-hand man, Gianni Letta, named to succeed him as premier. It is not known if Italian President Giorgio Napolitano would agree to that.

Berlusconi has pledged a vote of confidence, expected next week, on reforms and other stopgap measures to lower Italy's debt — now near 120 percent of GDP — and revive the dormant economy.

The new reform measures include a plan to sell government assets, which is expected to raise €5 billion ($6.9 billion) a year for three years; and tax breaks to encourage employment for the young and to get women back into the work force in a country where youth unemployment is 29 percent and just 48 percent of women have jobs. The legislation would also allow stores to stay open on Sundays and open up closed professions.

Berlusconi has also pledged to raise the retirement age to 67 for all to match European trends, despite the fierce resistance of his allies in the Northern League.

The leader of Italy's largest labor confederation, meanwhile, is predicting 2012 will be a "terrifying" year for the economy even if Berlusconi leaves power soon. CGIL leader Susanna Camusso on Monday also slammed Berlusconi's anti-crisis plan as containing virtually nothing to spark economic growth.

"I hope there will be (early elections), and that they will be soon for the good of the country," she told The Associated Press.

Mario Draghi, an Italian who just took over as European Central Bank president, said last week that since joining the euro, Italy had enjoyed unnaturally low interest rates for years because its monetary policy was linked to that of stronger economies like Germany.

"For a long time spreads between sovereign bonds in the euro area were very narrow. In point of fact, they did not reflect the different realities of different countries," Draghi told reporters.

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Colleen Barry contributed from Milan.

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