The uncertainty over the timing of Berlusconi’s departure - and questions over what would follow - kept Italy in the crosshairs of the financial markets yesterday, and prompted President Giorgio Napolitano to issue a statement reaffirming that the prime minister would resign as announced and that Parliament would approve austerity measures “within a few days.’’
Indeed, Italy’s fate appeared in the hands not only of the markets, but also of Napolitano, an 86-year-old former Communist who must exercise moral persuasion on a government known more for its sex scandals than economic policies.
In a statement, the president said he would either form a new government quickly or take the necessary steps to go to early elections, adding that in any case “emergency measures’’ could be adopted “at any time,’’ so there was no risk of prolonged political instability.
While Berlusconi has said he wants to go to elections, momentum appeared to be building for a government guided by a respected nonpolitician. Last evening, Napolitano named Mario Monti, a former European Commissioner and the most widely discussed candidate to guide such a government.
The political turmoil comes at a time of rising risk. Barclays bank yesterday issued a note saying that Italy “may be beyond the point of no return,’’ and other financial analysts - and officials in the Italian Finance Ministry - said the country could survive for several more quarters even with bond yields around 7 percent.
Nevertheless, the market jitters spurred Italy’s Parliament to move with uncharacteristic urgency, agreeing to start discussion of the emergency measures, with the aim of adopting them as early as the weekend, several lawmakers said.
But concerns were widespread that the substance of the measures, which were officially presented by Finance Minister Giulio Tremonti last evening, might not live up to the stringent demands of the current financial markets.
A letter to Tremonti sent last week by Olli Rehn, European commissioner for economic and monetary affairs, expressed doubts that they would “ensure the achievement of a balanced budget in 2013.’’
It also called on the government to draft additional measures to reach targets.
The difficulties in proposing, let alone enforcing, the measures stem from deep divisions within the center-right coalition, a patchwork of conflicting vested interests.
In August, the European Central Bank demanded structural changes in exchange for buying Italian debt. Parliament pushed through some debt-reducing measures, including cuts to local government and tax increases. But some observers said that so-called Euroskeptic factions in the Berlusconi government had never taken the demands seriously.
A delegation from the European Commission and the European Central Bank began meeting with officials in Rome yesterday to step up surveillance of Italy’s reform program, days after the International Monetary Fund said it, too, would monitor Italy’s progress.
