Berlusconi's Party Withdraws Support of Monti

The center-right PDL (People of Liberty Party), the largest party in the Italian Parliament, withdrew its critical support for the technocratic government led by Prime Minister Mario Monti.  It did so by withholding votes on two votes of confidence, but technically did not trigger a loss of confidence because it did not vote in the negative.  Monti informed the Italian President that he would stand down as soon as the 2013 budget were approved. 

The move coincided with PDL leader Silvio Berlusconi’s announcement that he intends to stand for election for a fourth tenure as premier, and sets up snap elections, probably in March, which likely would have occurred by April anyway, as the unelected Monti had previously announced he would not stand in the election.

The PDL praised Monti’s patriotism and honesty, but criticized his increases in taxes that have been a drag on the Italian economy, which, in turn, have reduced government tax revenue and delayed the balancing of the budget.  Berlusconi expressed opposition to those policies that have caused economic recession and increased the debt.  The former prime minister accused his successor of being “Germano-centric” by following the financial diktats of the German government, which he observed was acting in a self-interested manner.  According to CNBC, The PDL also cited Italy’s vote in the United Nations General Assembly to recognize Palestine as a state.

The media repeats that Berlusconi had resigned as prime minister because of the financial crisis, but, as it did during his premiership, neglects to report the considerable austerity measures his government enacted that put Italy, despite its massive debt, on track for a balanced budget by 2013 (since delayed by the current government until the following year).  Monti did acknowledge the reforms that began under his predecessor.  The lack of confidence that markets had in Italy under its center-right government was in its political stability, not in its policies, in addition to concerns that the Italian people, like the Greek, would not accept significant austerity measures.  Despite the unpopularity of the austerity program, the Italians have, in fact, generally accepted the necessity of the measures.

The impending end of Monti’s executive shook world financial markets, which Berlusconi dismissed as yet another manufactured opportunity for foreign speculators, until they considered that the three-time premier is unlikely to win, according to opinion polls.  Also, an effort by the leading center-left party and the main centrist Christian party is underway to persuade Monti to stay on for a time, instead of resigning immediately after the passage of the budget.  Regardless, both the main center-left and center-right parties support austerity in terms of spending cuts, despite their difference over taxes.  No party is close to being favored by a majority, which would necessitate a coalition, as usual.

Berlusconi created a new wrinkle in this developing story by offering to support Monti if the incumbent stood for the election by leading a broad center-right coalition with the PDL, the Christian centrists and his former coalition ally, the Northern League, which had opposed Monti.  Monti, who, according to Italian news agency ANSA, received the support of several European heads of state who lead the center-right European Peoples’ Party at its meeting in Brussels, Belgium attended by both Monti and Berlusconi, did not announce whether or not he would run, as opposed to his previous insistence that he would not.  ANSA reports that the main center-left party, although it would prefer Monti not run, would support him if he does.

I shall continue to post updates on this matter.  As I have noted during the fiscal crisis in the European Monetary Union, Italy, even more than Spain, is the firewall for the eurozone against the contagion of default on sovereign debt that could lead to the end of the single currency.  The crisis, which has contributed to Europe’s recession, which has, in turn, exacerbated the debt problem, has also been a drag on the global economy.