Italian Prime Minister Silvio Berlusconi promised Tuesday to resign after parliament passes economic reforms demanded by the European Union, capping a two-decade political career that has ended with Italy on the brink of being swept into Europe's debt crisis.
President Giorgio Napolitano met for about an hour with Mr. Berlusconi after the Prime Minister lost his parliamentary majority during a routine vote earlier Tuesday. In a statement, Mr. Napolitano's office said Mr. Berlusconi had promised during the meeting to resign once the economic reforms have passed parliament.
A vote on the measures is planned for next week.
Mr. Berlusconi, 75, took 308 out of 630 votes on a routine vote to approve last year’s public accounts. That was enough for him to win the vote, because of abstentions, but too few to ensure he remains in control of his centre-right coalition government.
“The government no longer has a majority,” Opposition leader Pier Luigi Bersani, of the Democratic Party, said shortly after the vote. “We all know Italy runs the real risk of not being able to access the financial markets in the next few days.”
The abstentions were a clever strategy for the Opposition. They assured the vote on the public accounts would be formally approved yet equally assure that Mr. Berlusconi would be deprived of a majority.
Mr. Bersani urged Mr. Berlusconi to ask President Giorgio Napolitano to start talks to form a new government.
Mr. Berlusconi learned that he would probably lose the vote when, earlier in the day, his coalition partner, the Northern League (Lega Nord), urged him to resign.
The Northern League, led by Umberto Bossi, brought down Mr. Berlusconi’s first government, in 1994.
Mr. Berlusconi has won more than 50 confidence votes since 2008, when he was elected for a third time since the 1990s. A series of defections, however, tilted the odds against him. In recent days, three party members joined the opposition and six others called for him to quit. Mr. Berlusconi needs 316 votes in the 630-seat chamber to claim victory.
The vote had little immediate effect on the markets, probably because it went both for and against Mr. Berlusconi, meaning it brought little immediate clarity to the political situation in Rome.
All of Europe’s top stock indexes, including Milan, were up on the day. Italian bond yields barely budged; at 6.6 per cent, they remained near their all-time high, signaling that investors still fear the Italian debt crisis has not eased.
Italy’s soaring bond yields have triggered high levels of anxiety in the Italian treasury and among the big Italian companies whose bonds are priced off Italian sovereign debt. Economists consider a 7-per-cent yield – just above the current yield of Italians bonds – exceedingly dangerous.
“Shortly after hitting this particular benchmark, Ireland and Portugal found themselves requesting a bailout,” Stewart Hall, senior fixed income and currency strategist at RBC Capital Markets, said in a note Tuesday. “Given the sheer size of the stock of Italian debt and an aggressive funding calendar over the next two years, the costs of funding this debt is going to exact a toll on the budgetary process and further complicate efforts to contain Italian deficits.”
Italy’s debt stands at €1.9-trillion, the highest in Europe. Its debt to gross domestic product ratio, at about 120 per cent, is also the continent’s highest. Italy must roll over more than €300-billion next year. While Italy’s debt is enormous, its budget deficit is among the lowest of the large economies of the European Union and it is running a primary budget surplus, that is, a surplus before interest payments.
Emma Marcegaglia, the head of the Italian employers’ lobby group Confindustria, said Italy’s high borrowing costs are damaging Corporate Italy. “Italy has serious difficulties with a spread of 500 basis points [over German bonds]” she said at a conference in Milan. “On the financial market, that means our banking system finds it harder to operate. It’s absolutely fundamental [that]politicians do their job.”
With a report from The Associated Press