Silvio Berlusconi, Italy’s scandal-hit prime minister, may have survived the fistfights and cabinet revolts on the chaotic road to the eurozone summit in Brussels last night, but time is running out for “Il Cavaliere”.
The surprise of the summit was the response to a “letter of intent” from the Italian government, which had struggled to articulate how it was going to be able to deal with its debt – which stood at 116% of gross domestic product last year. The yields on Italian bonds have also reflected a distinct lack of confidence in its macroeconomic management.
The letter included measures to reform employment law; the privatisation of local services and some state properties; incentive structures to encourage infrastructure investments; and gradually raising the retirement age. All of these reforms were needed, and the summit “welcomed” them.
“The reforms do not cover all of Italy’s structural weaknesses, implementation details are obviously not provided yet and a clear timetable is needed, but if implemented they would represent an important step forward,” a Deutsche Bank report said on Thursday morning.
Markets, understandably, are sceptical about implementation. Internal rifts within the governing coalition - particularly between Berlusconi and Umberto Bosso’s right wing Northern League – have held up reform in the past at critical moments. Yesterday the Italian economist and former acting head of the International Monetary Fund’s European division called the government “dysfunctional” and said that the Italian situation was probably
In the run-up to the summit, rumours circulated that Berlusconi was on the verge of stepping down. While political uncertainty is rarely calming for markets, analysts were cheered by the news that a genuine reform candidate might emerge, should the coalition collapse.
The rumours proved unfounded, but Berlusconi’s political life might be coming to an end. A great survivor, revelations about his private life, including the alleged use of prostitutes, a scandal involving an underage dancer, as well as rumours of corruption and uncomfortably close relationships with the late Colonel Gaddafi and deposed Egyptian President Hosni Mubarak are finally taking their toll.
Berlusconi is fast becoming national embarrassment, whose wiretapped conversations - presented in evidence in a blackmail case where he is the victim, rather than the defendant - showed a man with little tact or respect for women, who allegedly flew his pimp to China to accompany him on an official visit.
As a Franco-German plan came together to save the stricken economy, the revelation that the Italian prime minister had called Chancellor Angela Merkel a “culona inchiavabile” (unf***able larda**e) did little for his or his cabinet’s credibility.
“His approval ratings are in the cellar, and his coalition is losing support, members and cohesion as it becomes clear that this is a sinking ship,” Pepe Egger, head of Western Europe forecasting at Exclusive Analysis, said, adding that the prime minister’s era is coming to an end.
However, Egger added, the same tangled mess of personal and business interests that have caused such consternation in Italy are the reason he cannot go quickly or quietly.
“He can't resign, or risk losing an early election, as he hasn't sorted out his personal issues yet,” Egger said. “He entered politics in 1994 to protect his personal business interests, and his personal interest not to end up in jail. This mission has not been accomplished yet, as a number of things like judges, the division of power, or the constitution stood in the way. So he will go on as long as he can; the question is when will his allies abandon him.”
Bossi holds many of the cards in Italy now, analysts said. If he chooses to force an early election as a condition of continuing support, Berlusconi could go before the electorate as soon as the spring of 2012.
“It seems likely that that would be the end for Berlusconi,” Egger said.