Bloomberg News

Berlusconi Says He’ll Complete Term, Majority Remains Solid

June 22, 2011

June 22 (Bloomberg) -- Prime Minister Silvio Berlusconi said his government remains solid and that attempts by the opposition to topple it are undemocratic and risk making Italy the next victim of Europe’s debt crisis.

Berlusconi said he would complete his term, which runs to the end of 2013, in a speech to parliament in Rome today to defend a partial restructuring of his administration. The speech came a day after he won a confidence vote on an economic plan with 317 votes in the 630-seat Chamber of Deputies, the most he’s mustered since a former ally defected with dozens of supporters last July.

“This means that the majority exists, that it is strong and cohesive, and it is the only one capable of governing the country at this moment,” Berlusconi told lawmakers.

Concerns about the stability of Berlusconi’s government contributed to Moody’s Investors Service putting Italy’s credit ratings under review last week for a possible downgrade. In a similar move last month, Standard & Poor’s lowered Italy’s outlook to negative from stable, citing slowing growth and “diminished” prospects for debt reduction.

Italy’s borrowing costs have been rising as growing concern about a possible Greek default prompts investors to shun the bonds of the region’s other high-debt nations. The risk premium investors demand to hold 10-year Italian debt over comparable German debt widened 6 basis points to 192 basis points today, nearing last week’s six-month high of 193 basis points. That compares with 1,395 basis points for Greece.

‘International Speculators’

Police clashed with demonstrators outside the parliament during Berlusconi’s speech.

Berlusconi said that his government, by containing the country’s budget deficit, has managed to prevent “international speculators” from attacking Italian bonds. The deficit is forecast to fall to 4 percent of gross domestic product this year, one of the lowest in the euro area. Debt will peak at 120 percent of GDP this year.

“If the government falls, our borrowing costs would go right up and we would have to cut resources for health care, for schools and for culture, to pay higher interest rates.” Berlusconi said.

The premier made the comments in the second of two speeches in parliament to defend a partial reshuffle of his government to include new deputy ministers. President Giorgio Napolitano called on Berlusconi to appear in the chamber to demonstrate he has enough support and explain the changes to his team, which were made to shore up backing from his allies after the defections earlier this year.

Voting Setbacks

Berlusconi’s grip on power was further weakened after his candidates lost mayoral races in key cities, including Milan, in regional elections in May. He suffered another setback last week when almost 60 percent of eligible Italians voted to overturn a series of his policy initiatives, the first referendum to achieve the necessary 50 percent participation threshold since 1995.

The premier said that his alliance with the Northern League party remains intact and that his government will go ahead with planned legislative efforts, including an overhaul of the tax and justice systems and a plan to turn more power over to the regions demanding by the League.

--Editors: Eddie Buckle, Fergal O’Brien

To contact the reporters on this story: Andrew Davis in Rome at abdavis@bloomberg.net; Lorenzo Totaro in Rome at ltotaro@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net.


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