Bloomberg News

Berlusconi’s Majority Looks Wobbly as Ally Gets Sent to Jail

July 22, 2011

July 22 (Bloomberg) -- Italian Prime Minister Silvio Berlusconi’s majority looks increasingly wobbly after his key coalition partner backed the arrest of a ruling party lawmaker, the latest to be investigated for alleged corruption.

Members of the Northern League joined opposition parties on July 20 as the Chamber of Deputies approved a request by Naples prosecutors to arrest Alfonso Papa, a former magistrate from the southern port city. Papa denies the allegations of influence peddling and revealing state secretes and told lawmakers in Rome that any trial will prove his innocence.

The vote “clearly is another signs of an increasing ‘discrepancy’ between the League and” Berlusconi’s party, “which may turn into a proper rift,” Lavinia Santovetti, an economist at Nomura International in London, said in an e-mail. “At the moment, it looks very hard for the coalition to survive until 2013,” when its term ends.

Papa’s case has highlighted deepening divisions between Italy’s ruling parties as the government tries to protect the country from Europe’s debt crisis. Italy’s 10-year borrowing costs surged 1 percentage point this month, reaching a euro-era record 6.03 percent on July 18 on concern about contagion. The yield fell to 5.344 percent today after European leaders agreed yesterday on new aid for Greece and steps to shield countries such as Italy and Spain from the fallout.

Naples Trash

The League, an anti-immigrant party based in the north that seeks to devolve government powers to the regions in an overhaul called “federalism,” is increasingly lining up against key initiatives of Berlusconi’s People of Liberty Party. The League voted this week against a government plan to ship trash from Naples for treatment in other regions to ease that’s city’s garbage crisis. Its leaders have also vowed to vote against Berlusconi in coming days on renewing funding for foreign peacekeeping missions, including in Afghanistan and Lebanon.

“We’ve seen enough criminal cases inside” Berlusconi’s party, League member Gian Paolo Gobbo, mayor of Treviso, told Radio24 on July 20. “The moral question is increasingly nagging at the People of Freedom party, and once we get federalism passed, we will toss Berlusconi out to sea.”

The spate of corruption cases also reminds voters of Berlusconi’s own legal woes as he seeks to defend himself in four different corruption cases. Papa is the latest in a series of Berlusconi allies to come under investigation, adding to investor concern that the government’s legal woes are distracting from efforts to tame finances.

Credit Rating

Confidence in the country has waned over the past two months as both Standard & Poor’s and Moody’s Investors Service warned that they may cut its credit rating because slow economic growth and political instability may threaten efforts to reduce the euro-region’s second-largest debt that stands at almost 120 percent of gross domestic product.

League leader Umberto Bossi, who blamed Berlusconi for the ruling parties’ rout in local elections across the country in May, had urged his party to approve Papa’s arrest. Berlusconi, suffering from record-low approval ratings, warned that would spark a wave of prosecutions similar to the “Clean Hands” graft probes that helped topple Italy’s political old guard in the early 1990s and led to the media mogul’s entry into politics.

“Remember, before you press that button to vote, you’ll be opening the bars of prison for yourselves as well,” Mario Pepe, a parliamentarian for the People of Liberty party told lawmakers before the ballot in the lower house.

Berlusconi yesterday said his coalition “is not at risk.”

Resignations

Last year, former Industry Minister Claudio Scajola and former Finance Ministry Undersecretary Nicola Cosentino were both forced to step down amid respective probes into alleged corruption. Former Credito Cooperativo Fiorentino SC Chairman Denis Verdini, a coordinator for Berlusconi’s party, saw his bank put under state administration after he came under investigation for allegedly rigging tenders and being part of a secret society aimed at defrauding the state. All three men deny any wrongdoing.

Over the last month, Agriculture Minister Saverio Romano has been forced to assert his innocence as Palermo prosecutors probe him for alleged Mafia ties. President Giorgio Napolitano expressed “reservations” about Romano’s appointment last spring due to his alleged involvement in “serious crimes,” according to a March 23 statement. Marco Milanese, a former aide to Finance Minister Giulio Tremonti who’s now a parliamentarian, is also being investigated by Naples prosecutors for alleged corruption. Both Romano and Milanese deny wrongdoing.

Rent-Free

Tremonti, credited by many economists for keeping Italy’s budget deficit in check, said on July 7 he was moving out of a Rome apartment provided to him rent-free by Milanese. “After learning of the judicial developments concerning the property, as of this evening I will change my arrangements,” Tremonti said in an e-mailed statement.

Berlusconi, who calls himself “history’s most persecuted man,” is himself being tried in Milan for allegedly paying an underage nightclub dancer for sex. He also faces bribery, fraud and tax-evasion charges in three other trials related to management of his broadcaster Mediaset SpA. The premier denies any wrongdoing and has accused prosecutors of seeking to destroy him politically.

His holding Fininvest SpA was ordered by a Milan appeals court on July 9 to pay Compagnie Industriali Riunite SpA more than 540 million euros ($770 million). Fininvest was found to have bribed a judge during a takeover bid for publisher Arnoldo Mondadori Editore SpA dating back to 1991. Fininvest has said it will appeal.

--Editors: Andrew Davis, Andrew Atkinson

To contact the reporter on this story: Jeffrey Donovan at jdonovan26@bloomberg.net

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


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