Prime Minister Silvio Berlusconi is blamed for fostering the conditions that have led to a severe debt crisis in Italy – and for being unable to promote reform. Even party stalwarts are turning against him.
When rumors spread that Prime Minister Silvio Berlusconi was to resign “within hours,” on late Monday morning, Italy's stock exchange suddenly gained 3 percent. But when a close aide of Mr. Berlusconi's denied the rumors, enthusiasm faded quickly, and by 1 p.m., the stock exchange had given up 1 percent of that gain.
The reactions at Milan's stock exchange (see graph here) reflect the growing discontent, both at home and abroad, over Mr. Berlusconi's ability to handle a financial crisis that might drag the whole eurozone down with Italy.
Italy is now facing one the most severe economic crises in the eurozone, triggered by the nation's huge public debt and by its lack of productivity growth in the past 15 years. Markets fear the country might eventually go bankrupt under the weight of its public debt, now close to 120 percent of GDP. An Italian bankruptcy would threaten the whole eurozone, as it is unclear if the European Union would be able to bail out the debt.
Berlusconi, who has been leading Italy on and off since 1994, is largely blamed both for having created the conditions that led to the crisis and for his inability to respond once it erupted. But unlike the leaders of other countries in southern Europe facing similar difficulties – Spain's José Zapatero and Greece's George Papandreou – Berlusconi seems unwilling to leave his job. He is expected to face a confidence vote in the parliament on Tuesday that analysts say he has a chance of surviving by a slim majority.