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Berlusconi, lacking alternatives, resigns as Italian PM

Iralian Prime Minister Silvio Berlusconi lost his parliamentary majority at a key vote on Tuesday.

Allesandro Bianchi/Reuters

Silvio Berlusconi's near 20-year domination of Italian politics, which started with a promise to reform the sclerotic economy and ended with international oversight of his government's ailing finances, has come to a humiliating end with his vow to resign.

His resignation pledge made him the biggest political casualty of a crisis that has destroyed the careers of the leaders of almost every debt-choked weakling in the euro zone, from Greece to Ireland. It came less than a week after he was railroaded into "inviting" the International Monetary Fund to monitor and verify the economic reform and austerity packages demanded by the European Union at its Oct. 26 summit.

The IMF's arrival in Rome was a devastating blow to Mr. Berlsusconi, who has prided himself in his economic management and long denied that Italy's economic woes were dire.

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He vowed to resign after losing his majority in the lower house on what should have been an utterly routine vote to approve the public accounts. But his resignation commitment, made to Italian President Giorgio Napolitano, immediately triggered another spasm of uncertainty and political intrigue that has defined Mr. Berlusconi's typically scheming, if entertaining, reign.

Mr. Berlusconi, 75, is not stepping down immediately. He said he would go only after parliament, where his party still controls the upper house, passes a financial stability law that would implement the austerity and economic reform packages.

That may not happen for another couple of weeks – a long time in the chaotic and unpredictable world of Italian politics. In the meantime, he will face a confidence vote that he should lose but, conceivably, may not if he can cajole some rebel parliamentarians to return to the fold.

"After the approval of this finance law, which has amendments for everything which Europe has asked of us and which the Eurogroup [the 17 euro zone finance ministers]has requested, I will resign to allow the head of state to open consultations," he told Canale 5 television, one of the stations in his vast Mediaset empire.

He didn't say what he would do after the law is passed, but Italian political observers were betting he would not retreat to his Sardinian villa to write his gaudy memoirs.

"You can bet he will try to run again – he hasn't abandoned politics at all," Annalisa Piras, a correspondent for Italy's Espresso magazine, told the BBC.

As head of state, Mr. Napolitano has the power to back a technical interim government that would push through the economic reform package without fear of being taken down by confidence votes or immediate elections. But Mr. Berlusconi might try to persuade Mr. Napolitano to call a new election, one that he might contest, or allow him to try to form a new coalition government.

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Mr. Berlusconi, a media and real estate mogul, first became Prime Minister in 1994 and was re-elected twice, the last time in 2008, just before the financial crisis hit, tipping Italy into recession. Throughout his 17 years in office, Mr. Berlusconi has been dogged by endless political, alleged corruption and sex scandals, one of which cost him his second marriage. While he had several close calls, he managed to use his political might, control of commercial television and savvy legal manoeuvrings to remain in office.

Mr. Berlusconi was sunk by his long time political ally, the Northern League, the quasi-separatist, xenophobic, anti-European party base that is popular in the wealthy industrial north and is led by Umberto Bossi.

Early on Tuesday, Mr. Bossi, 70, urged Mr. Berlusconi to resign, all but assuring that the Prime Minister would lose his majority in parliament's lower house when the votes on the public accounts were tallied. In the end, Mr. Berlusconi won enough votes – 308 of 630 – to approve the accounts, but fell eight votes short of the majority he needed keep his government intact because of abstentions.

The abstentions proved a clever strategy for the opposition. They assured that the vote on the public accounts would receive formal approval for the sake of the country, yet equally assured that Mr. Berlusconi would lose his majority.

Market reaction to the resignation was mixed. European and American markets rose and the euro strengthened against the dollar as investors bet that the next Italian government, whether interim or elected, will be able to revive the euro zone's third-largest economy and bring down its €1.9-trillion debt, the continent's largest.

Yields on Italian sovereign bonds, however,s continued to soar on Tuesday, reaching 6.77 per cent, a record high since the euro's launch 12 years ago. A yield that high suggests that bond investors fear the Italian debt crisis will get worse. Greece, Ireland and Portugal all sought bailouts shortly after their bond yields reached 7 per cent.

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EU leaders and officials have been frustrated with the slow-pace of Italy's efforts to bring down its debt and speed up economic reforms, for fear that rising Italian bond yields could turn Italy into Greece times ten. While they would never say so, they are probably delighted that Mr. Berlusconi is resigning.

"We are very worried about the situation in Italy and the [EU and European Central Bank]want to help the country proceed with the reforms," EU Commissioner for Economic and Monetary Affairs, Olli Rehn, said on Tuesday, adding that he wanted Italy to ramp up its reforms "with this government or another."

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