(For more on the region’s debt crisis, see EXT4.)
Nov. 13 (Bloomberg) -- Italian President Giorgio Napolitano lobbied the country’s political parties to support a new government led by former European Union Competition Commissioner Mario Monti after Prime Minister Silvio Berlusconi resigned.
Talks began this morning and Napolitano is due to meet the two largest parties, Berlusconi’s People of Liberty party and the Democratic Party, later this afternoon. Both have said they’ll back a Monti government, paving the way for a new premier to be appointed this evening.
Berlusconi, who dominated Italian politics for almost two decades, stepped down last night as the fallout from his legal woes and contagion from the euro-region’s debt crisis led his government to unravel. He presented his resignation after the Parliament in Rome approved measures to spur growth and reduce borrowings.
Pierferdinando Casini, leader of the opposition Union of Centrists party, said he hoped Monti’s government would last until the end of the legislature in April 2013. Antonio di Pietro, leader of the opposition Italian Values party, also pledged his support after talks at the presidential palace in Rome, adding that the new government should have a “time limit.” The Northern League, Berlusconi’s coalition ally, said it opposed a Monti government and favored elections.
Thousands of Italians gathered outside the presidential palace to witness the final minutes of the country’s longest- serving prime minister since the Second World War. Berlusconi won three elections and governed for more than half the 17 years he was in politics. Many yelled “buffoon” as he drove by. Some held signs saying Liberation Day, referring to the holiday to mark the Allies’ conquest of Italy at the end of the war. People drank prosecco and danced, making an atmosphere more reminiscent of Italy’s 2006 World Cup victory than a political event.
“We cannot imagine that without Berlusconi our problems are solved, but without Berlusconi we can start working on how to solve the problem,” Rocco Buttiglione, a member of the Union of Centrists and a member of Berlusconi’s previous government, said yesterday in Rome.
Berlusconi, 75, said on Nov. 8 that he would resign as soon as the budget measures were passed. Defections had left him without a majority in parliament, and Italy’s 10-year bond yield had surged past the 7 percent threshold that led Greece, Ireland and Portugal to seek EU bailouts. Squabbling among his Cabinet paralyzed the government, and his defense of charges that include bribery and paying for sex with a minor sapped his popularity at home and undercut his support abroad.
Since Berlusconi’s first election, “not very much has changed,” said Grant Amyot, professor of politics at Queen’s University in Ontario, Canada, and co-author of “The End of the Berlusconi Era?”
“All the world has become more competitive,” Amyot said. “Italy’s economic and state structures needed to be reformed, and it hasn’t been done. That’s the real problem: Stagnation is the word I would use to describe the impact of Berlusconi’s rule.”
The yield on Italy’s benchmark 10-year bond jumped to a euro-era record 7.48 percent on Nov. 9, hours after Berlusconi first said he would resign. Italy was forced to pay 6.087 percent on one-year bills at an auction on Nov. 10, the most in more than 14 years. News of the growing support for a Monti government helped knock more than 100 basis points off that peak and sent Italy’s benchmark SPMIB Index up 3.7 percent on Nov. 11, the biggest advance of any European benchmark.
In his third term, Berlusconi was increasingly distracted by his four personal court cases while his government faced pressure from European allies to reduce the euro-area’s second- biggest debt. Italy’s bonds slumped, leading the European Central Bank to start buying the country’s debt in August.
Berlusconi’s fall comes two days after Greek Prime Minister George Papandreou resigned to make way for a coalition government with broader support to implement cost-cuts that will shrink the biggest deficit in the euro region. Changes of governments in Italy and Greece were “positive,” U.S. President Barack Obama said in Honolulu yesterday.
Monti will face confidence votes in both houses of parliament this week. If successful, he will lead a so-called technical government of mostly non-politicians charged with implementing the austerity measures passed by Berlusconi. They will try to persuade investors that Italy can trim its debt of 1.9 trillion euros ($2.6 trillion).
His economic policy will initially focus on cutting borrowing, before seeking to revive expansion in an economy where growth has lagged behind the euro-region average for more than a decade, la Repubblica reported today, without saying where it got the information.
Monti is considering resurrecting a property tax on first homes that was abolished by Berlusconi, introducing a wealth tax and speeding up asset sales, the newspaper said. He will follow with an overhaul of labor-market laws that could make it easier for companies to fire workers, and offer incentives for taking on young workers in a country where youth unemployment is almost 30 percent, according to the report.
Monti plans to name Guido Tabellini as finance minister, Corriere della Sera reported yesterday, without saying where it got the information. Tabellini, 55, is a professor of economics at Bocconi University in Milan, where Monti is president. Giuliano Amato, a former prime minister and now an adviser to Deutsche Bank AG, will be foreign minister, Corriere said.
To win the ECB bond purchases, Berlusconi pledged to ease rigid hiring rules, raise the retirement age, open up closed professions and balance the budget in 2013. Monti’s government won’t have much time because he can’t serve beyond April 2013, when Berlusconi’s term was due to expire.
Napolitano’s decision to push for a Monti government has already been praised by leaders outside Italy. International Monetary Fund Managing Director Christine Lagarde, speaking in Tokyo yesterday, called Monti “extremely competent.” ECB President Mario Draghi met with Monti this morning in Rome.
Monti spent almost a decade in Brussels as EU commissioner, first for the internal market and then for competition. In 2001, he blocked General Electric Co.’s takeover of Honeywell International Inc., the first time the EU had stopped a deal previously approved by U.S. authorities. He also levied a record 497 million-euro fine against Microsoft Corp. He’s been an international adviser to Goldman Sachs Group Inc. for six years.
--With assistance from David Tweed, Flavia Rotondi, Alessandra Migliaccio and Lorenzo Totaro in Rome. Editors: Amanda Jordan, John Buckley
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