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.
“Even if Berlusconi survives the confidence vote, the very day after, he will have to introduce tough economic reforms, which he is not able to,” says David Bidussa, a historian at Istituto Feltrinelli, a progressive think tank. “How much of the current crisis can be blamed on Berlusconi is subject to debate, but recent facts demonstrate he is not able to make the necessary reforms to get out of it.
“For two decades, he has built his political identity indulging Italians' worst habit: to evade taxes,” says the historian, recalling how Berlusconi has told citizens that the state rips them off and that evading taxation is acceptable. “But now the obvious priority is to cut Italy's huge debt, which means more taxation. Berlusconi cannot do such a thing, it's just against his nature.”