(Updates with time of vote in third paragraph, comments by economist in 10th, Draghi in 11th.)
Oct. 13 (Bloomberg) -- Italian Prime Minister Silvio Berlusconi faces a confidence vote in Parliament tomorrow to prove he has enough support to rule after failing to muster a majority on a legislative ballot this week.
“There’s no credible alternative to this government and early elections wouldn’t be a solution to the problems we face,” Berlusconi said as he called for the vote in remarks to the Chamber of Deputies. “With me is a politically cohesive majority to prove that Italy can make it, will make it and can relaunch itself by defeating the strategy of pessimism.”
Debate on the confidence motion will begin at 11 a.m. and voting will start at 12:30 p.m., Chamber Speaker Gianfranco Fini told legislators in Rome today.
Berlusconi is struggling to convince investors he can cut Europe’s second-biggest debt and reverse surging borrowing costs that risk making Italy the biggest victim of the euro-area debt crisis. Italy was downgraded by the three main rating companies in the last month even after approving 54 billion euros ($73 billion) in austerity moves that convinced the European Central Bank to buy Italian bonds to bring down record yields.
While borrowing costs fell and demand rose as the Treasury sold 6.18 billion euros in bonds today, Italian bonds slid after the auction. The yield on the 10-year benchmark gained 7 basis points to 5.83 percent, the highest since the ECB began its bond buying Aug. 8. The ECB bought Italian debt today after the sale, according to two people with knowledge of the transactions.
President Giorgio Napolitano had urged Berlusconi yesterday to address Parliament to clear up “questions and concerns” about the government’s support after the lower house failed to rubber stamp the 2010 budget report in a vote on Oct. 11.
Finance Minister Giulio Tremonti and Umberto Bossi, who heads the Northern League party that backs the majority, were not present for the failed vote, raising questions about their commitment to the government whose term ends in 2013. Tremonti said in a statement that there was no “political reason of any kind” for his absence.
“What happened the other day has no political meaning,” Fabrizio Cicchitto, who heads Berlusconi’s People of Liberty party in the lower house, told reporters today. “We have problems, but those issues don’t affect the votes in Parliament, not the ones two days ago nor, I believe, the one tomorrow.”
Calls to Resign
Opposition leaders have called on Berlusconi to resign and said they will oppose the government in the confidence vote. The premier is nonetheless likely to survive the motion, Pier Luigi Bersani, who heads the main opposition Democratic Party, said in Rome today, Ansa newswire reported. “It’s all about survival, not governing the country,” Bersani was quoted as saying.
“The ruling majority remains numerically precarious and divided on many issues, and not least on economic policy,” Vladimir Pillonca, senior European economist at Societe Generale SA, wrote in a note to investors. “This uncertain and divided political environment remains a challenging setting to address Italy’s deep-seated economic and fiscal problems.”
Bank of Italy Governor Mario Draghi yesterday urged the government to quickly implement economic-growth measures as the austerity plan “isn’t enough.”
“If protracted, the high borrowing costs seen in the last three months could largely offset” the effects of the austerity measures, “with a further negative impact on the cost of debt, in a spiral that may end up being ungovernable,” Draghi, who is set to become ECB president on Nov. 1, said in a speech in Rome.
Italian growth has lagged behind the euro-region average for the last decade, making it harder to cut debt of about 120 percent of output, the second-largest in Europe after Greece. Berlusconi told legislators today that austerity risks slowing growth and promised tax, constitutional and judicial reforms to boost the economy.
--Editors: Jeffrey Donovan, Jerrold Colten
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