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Archive for Tuesday, November 8, 2011

Berlusconi vows to resign amid Italy debt woes

November 8, 2011

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— Italian Premier Silvio Berlusconi conceded Tuesday he no longer had the support to govern and announced he would resign like his Greek counterpart, becoming the biggest political casualty yet of the European debt crisis.

Berlusconi promised to leave office after Parliament passes economic reforms demanded by the European Union to keep Italy from sinking into Europe’s debt mess. He came to the decision hours after a vote on a routine piece of legislation made it clear he no longer commanded a majority in the lower Chamber of Deputies.

A vote on the reform measures is planned for next week, giving Berlusconi a few more days before his turbulent 17 years in public life — and a political era in Italy — draw to a close. Over the years, Italy’s political establishment watched as the media mogul survived sex scandals and corruption charges while branding his opponents communists, traitors and terrorists.

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

In Greece, critical power-sharing talks between Prime Minister George Papandreou and opposition leader Antonis Samaras dragged on Tuesday without the expected announcement of who will lead an interim government.

The two have agreed the new government will shepherd the country’s new 130 billion euro, or $179 billion, European rescue package through Parliament and end a political crisis that threatened Greece’s solvency and membership in the eurozone. Papandreou, the son and grandson of Greek prime ministers, will not lead it.

Wealthier European countries including Germany and France have already bailed out Greece, Ireland and Portugal, and Greece will get an additional 100 billion euros, or $138 billion, of debt relief as soon as it resolves its political crisis.

But as the eurozone’s third-largest economy, Italy, with debts of about 1.9 trillion euros, or $2.6 trillion, is considered far too big for Europe to bail out, putting even greater pressure on the country’s leaders to reassure markets that Italy is willing and able to get its financial house in order.

Italy’s borrowing rates spiked Tuesday to their highest level since the euro was established in 1999. The yield on Italy’s 10-year bonds was up 0.24 percentage point at 6.77 percent. A rate of over 7 percent is considered unsustainable and was the trigger point that forced Greece, Portugal and Ireland into accepting bailouts.

The usually defiant Berlusconi acknowedged he no longer has a parliamentary majority and said he will step aside for the good of the country.

“The markets don’t believe that Italy is capable or has the intention of approving these reforms,” he told his private Mediaset television. He added: “Things like who leads or who doesn’t lead the government” are less important than doing “what is best for the country.”

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