ITALIAN PRIME minister Silvio Berlusconi and his aides were still “touching up” the letter of intent he was supposed to present to euro zone counterparts yesterday up to the last minute before he left for the summit, inserting deadlines that had been omitted from an earlier draft.
Disputes within the coalition – between Mr Berlusconi and finance minister Giulio Tremonti, and with the allied and Eurosceptic Northern League – have already led to weeks of delays in proposing legislation on structural reforms that the European Central Bank had urged to be put in place by September 30th.
Mario Draghi, head of the ECB from next Tuesday and an outspoken critic of Mr Berlusconi’s economic record, can be expected to hold the prime minister to the fire if Italy is to remain on life support through ECB purchase of its debt.
Mr Draghi’s initial response to Mr Berlusconi’s proposals was relatively encouraging, calling them an “important step” which included “bold” provisions. Most commentators however suggested they were a diluted compromise aimed more at preserving cohesion in the coalition rather than the emergency steps Italy needs to take to regain market credibility and avoid the fallout from the Greek sovereign debt crisis.
When Mr Berlusconi returned from his dressing down at last Sunday’s summit, under orders to put together some form of Italian growth plan, his first task was to convince coalition partner and his ally, Northern League leader senator Umberto Bossi, that radical pension changes would have to form part of that package.
The problem about pensions in Italy is that 60-65 per cent of them are paid out in northern Italy – ie among Mr Bossi’s supporters. Mr Bossi said his party would be “killed” if it approved more pension cuts.
The point was made even more painfully on Tuesday by his longtime opponent, parliamentary speaker Gianfranco Fini. Speaking on current affairs programme Ballaro, Mr Fini chose to illustrate the unsustainable nature of the Italian pension system by pointing out how, in 1992, Mr Bossi’s schoolteacher wife had retired on a state pension at the age of 39.
Given that pensions clearly represent a serious sticking point for the Northern League, Mr Berlusconi had to work hard to persuade his old ally to at least partially swallow the bitter pill.
Political commentators believe that in return for his support for the Italian package, Mr Bossi may have received guarantees that the Berlusconi government will pull up stumps shortly after Christmas, prompting a general election next March.
Three of Italy's most prestigious dailies, Corriere Della Sera, La Repubblicaand the financial daily, Il Sole 24 Ore, all carried outspoken editorials yesterday calling on Mr Berlusconi to resign, with La Repubblicastating: "He should resign and give the country a chance to save itself while it still can. The problem is, he isn't a statesman and his own personal destiny worries him much more than that of Italy."
Mr Bossi clearly hopes the fall of the Berlusconi government will be followed, not by a “technical” or “institutional” government that would see out the legislature through to spring 2013, and might in the meantime enact badly needed electoral reform, but rather by an immediate general election to be held under the existing electoral legislation.
Current electoral law, hastily introduced by the Berlusconi government in 2005, is based on a list system.
According to this system, the party hierarchy alone determines the names on the ballot sheet. Such an arrangement would suit Mr Bossi well because the 70- year-old leader is facing serious internal party opposition. – (Additional reporting, Financial Times Limited 2011)
