Bloomberg News

Monti Plans to Resign as Berlusconi Seeks Return to Power

December 09, 2012

Italy's prime minister Mario Monti

Mario Monti, Italy's prime minister. Photographer: Alessia Pierdomenico/Bloomberg

Italian Prime Minister Mario Monti told the head of state he has lost support in Parliament and intends to resign, while earlier in the day his predecessor, Silvio Berlusconi announced plans for a return to power.

Monti will try to corral his coalition, which includes Berlusconi’s People of Liberty Party, for a vote to pass the budget before handing in his “irrevocable resignation” and leaving his post, President Giorgio Napolitano’s office said in an e-mailed statement late yesterday. Monti, 69, will quit immediately if his allies won’t comply, the premier’s spokeswoman, Elisabetta Olivi, said in a telephone interview.

“The prime minister doesn’t think continuing his term is possible and has therefore expressed his intention to resign,” Napolitano’s office said in the statement. Monti’s term was originally scheduled to conclude in April.

Speculation about Monti’s demise sparked a selloff in Italian debt last week, pushing the yield on the country’s 10 year bond up 10 basis points, or 0.1 percentage point, in three days to 4.53 percent on Dec. 7. The yield is still 247 basis points below its level on Nov. 16, 2011, when Monti was named prime minister.

Monti’s government was thrown into crisis this week by Berlusconi as the billionaire ex-premier prepared his election strategy. His allies in Italy’s Senate and Chamber of Deputies put two Monti confidence votes at risk on Dec. 6 by partially withdrawing their support. Yesterday, Berlusconi, 76, officially ended a six-week retirement from politics and announced he will run for the premiership to roll back Monti’s budget rigor.

People’s Support

“I am returning to the public sphere due to desperation,” Berlusconi told reporters at the practice facilities of his professional soccer team near Milan, according to a video posted on the website of Sky TG24.

People of Liberty will back the budget bill, party General Secretary Angelino Alfano told the Ansa news service after Napolitano’s statement. Italy’s Democratic Party, the second- biggest force in Monti’s coalition, wants to pass the budget, RAI 24 news reported yesterday, citing party head Pier Luigi Bersani.

Monti will resign the day of the budget vote if he is assured it will pass, Olivi said.

Elections will take place 45 to 75 days after Napolitano dissolves the parliament.

The showdown pits Monti, the economist and former university president, against Italy’s most successful politician of the past two decades. Monti has been weakened as his tax increases push Italy deeper into recession, while Berlusconi, who first became prime minister in 1994, has been tarnished by criminal trials, including a fraud conviction in October.

`Italian Situation'

Monti defended his record publicly yesterday before meeting Napolitano and urged voters to reject the politics of the past. Berlusconi had been pushed from power last year when Napolitano called Monti from academia and asked him to form an emergency administration to cut the deficit and shield Italy from Europe’s sovereign debt crisis.

“When I was installed in power 13 months ago, there was European, American and global interest in the Italian situation because we could have led to the definitive break-up of the euro zone,” Monti said yesterday in Cannes, where he gave a speech to the World Policy Conference, before returning to Rome to meet Napolitano.

2013 Budget Proposal

Monti’s budget proposal, announced in October, calls for a one percentage point increase in the value-added tax and would curb some deductions. The plan, which was criticized by the retailers lobby, consumer groups and labor unions, also seeks a one percentage point reduction to the two lowest income tax brackets, according to the proposal at the time it was announced.

Monti, who previously led Milan’s Bocconi University, succeeded in slashing Italy’s borrowing costs thanks to austerity and his push in Europe for collective crisis fighting. His tax increases and public spending cuts were supported in parliament by People of Liberty in partnership with the PD, its traditional rival.

Berlusconi is seeking a comeback after a year in which his party’s approval among the public plummeted. People of Liberty, or PDL, has been hurt by corruption scandals among regional members as well as Berlusconi’s own trials. PDL had 13.8 percent of public support in an SWG Institute poll released this week, compared with 30.3 percent for the PD.

Berlusconi was sentenced to four years in prison in a fraud verdict, which was tied to film rights involving his Mediaset SpA (MS) television company. He is free pending appeal. Berlusconi is standing trial in an unrelated case on charges of abuse of power and engaging a minor in prostitution.

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

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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