Berlusconi to resign after reforms promised to EU

Silvio Berlusconi announced on Tuesday he would resign after the adoption of key reforms, saying it was vital to show markets that Italy was "serious" and to work for the good of the country. Italian politics' billionaire king | Europe split on financial trading tax

world Updated: Nov 09, 2011 08:49 IST
news,hindustantimes,Debt crisis

Italian Prime Minister Silvio Berlusconi announced on Tuesday he would resign after the adoption of key reforms, saying it was vital to show markets that Italy was "serious" and to work for the good of the country.

"We have to show the markets that we are serious. I think that is the important thing we should worry about, then we can worry about who leads the government. The important thing is to work for the good of Italy," he said.

The Italian president's office said in a statement: "Italian Prime Minister Silvio Berlusconi has agreed to resign following the adoption of key economic reforms promised to the European Union."

"Once this commitment has been carried out, the prime minister will submit his resignation to the head of state," read the statement, which came after consultations between Berlusconi and President Giorgio Napolitano.

Napolitano will then "proceed with traditional consultations with maximum attention to the positions and proposals of every political force -- those of the majority from the 2008 elections as well as the opposition," it added.

Napolitano's office said Berlusconi had shown "his awareness of the implications of the results of Tuesday's vote" as well as "concern for the urgent need to give prompt answers to the expectations of European partners."

Italian politics' billionaire king

Berlusconi's centre-right coalition earlier on Tuesday failed to obtain an overall majority in parliament on a key vote as Europe ratcheted up the pressure for Italy to move quickly to put its public finances in order.

Debt crisis shakes Italy, Greece

Europe's debt crisis struck at the ancient capitals of Rome and Athens on Tuesday. Berlusconi squeaked through a key vote and resisted calls for his resignation, and Greek politicians said they were close to agreeing on a new government to lead their country through painful cutbacks.

Both governments are under heavy pressure to reassure financial markets that the 17-country eurozone is moving quickly to reduce crippling government debts before those debts break apart the monetary union and plunge the world into a new recession.

Wealthier European countries including Germany and France have already bailed out struggling Greece, Ireland and Portugal, and Greece will get another $138 billion of debt relief as soon as it resolves its political crisis.

Senior government officials said Greece would get a new prime minister later on Tuesday. They spoke on condition of anonymity because of the secrecy surrounding the second day of talks between Prime Minister George Papandreou and opposition leader Antonis Samaras. They hope to reach a power-sharing deal that will prevent Greece from going bankrupt.

Europe can't afford to bail out its $2.6 trillion debt pile, and wants to see Italy live up to promises to rein in spending and improve lagging growth so it can pay it off itself. Few believe Berlusconi sapped by scandal and economic bungling has the political clout to get that done, and calls are increasing for him to resign.

Berlusconi's main coalition ally, Northern League leader Umberto Bossi, urged him to resign, telling reporters on Tuesday: "We asked him to step aside, take a step to the side." Bossi is the volatile ally who brought down Berlusconi's first conservative government in 1994.

His comments came as he arrived for a much-watched vote that Berlusconi survived, but which laid bare the prime minister's lack of support in Parliament.

The vote, on a routine budget measure, won 308 votes of approval and no votes against in the lower house. But 321 deputies abstained from voting, most of them from the center-left opposition. If all 630 lawmakers had voted, Berlusconi would need a 316-seat majority to assure he was still in command.

Berlusconi scrutinised the vote tally handed him right after the vote, apparently trying to figure out who had abstained.

"This government does not have the majority!" thundered opposition leader Pierluigi Bersani, rising up in the chamber. "We all know that Italy is running the real risk in the next days to not have access to financial markets."

He was referring to Italy's borrowing rates, which have been soaring amid weeks of political uncertainty over Berlusconi's ability to oversee the adoption of austerity measures to fight Italy's growing debt burden.

Italian bond yields the interest rates Italy would need to pay when it borrows money reached their highest point since the country joined the euro in 1999 on increasing fears of default. The yields hit 6.73%, not far from the 7 percent levels that pushed Ireland, Portugal and Greece to seek bailouts.

Higher yields are signs of market fear of default and reluctance to lend, and they also make debt harder to repay in a vicious circle, since Italy needs to take out new loans to pay off the old ones.

The European Central Bank has been buying government bonds as a last-ditch defense to drive down yields and borrowing costs, but the bank insists the program is temporary. Eurozone finance ministers are working on ways to strengthen their bailout fund and give it effective lending power of over trillion through financial leverage and attracting money from private investors.

Even that wouldn't be enough to save Italy, the eurozone's third-largest economy.

Europe split on financial trading tax

In Greece, Papandreou and Samaras agreed over the weekend to forge an interim government that will shepherd the country's new $179 billion European rescue package through Parliament.

By Tuesday afternoon there were still no details of when an interim prime minister would be announced, but the pressure was increasing on Greek politicians to make decisions soon. There was mounting speculation that a former deputy at the European Central Bank, Lucas Papademos, might replace Papandreou.

First Published: Nov 08, 2011 22:30 IST