Berlusconi's Government Hobbled as Ally Fini Calls on Premier to Step Down

Italian Prime Minister Silvio Berlusconi’s government risked unraveling after the co-founder of his ruling party called on the premier to resign and threatened to pull his ministers out of the administration.

Gianfranco Fini, who is also speaker of the Chamber of Deputies, called for “a new political agenda,” saying in a speech near Perugia, Italy, yesterday that Berlusconi’s administration was “adrift.” Fini also called for the country’s election law to be revamped before any new vote was held, a position opposed by Berlusconi.

The yield premium investors demand to hold Italian 10-year bonds over similar maturity German bonds rose 4 basis points to 159 basis points. The Italian spread widened more than that of the other so-called peripheral countries Spain, Greece, Ireland and Portugal.

“This escalation in political tensions comes at an awkward time given the recent rise in market concerns for other high- debt countries,” said Marco Annunziata, chief economist at UniCredit Group in London. “A full-fledged political crisis would inevitably result in some widening of spreads on Italian debt.”

Split With Berlusconi

Fini initially broke from Berlusconi’s People of Liberty bloc in July, criticizing the premier for not permitting debate within the party and passing laws aimed at giving him immunity from corruption prosecutions. A truce reached five weeks ago when Fini and his forces backed Berlusconi in a confidence vote on his program, unraveled after media reports that Berlusconi intervened to free an underage girl from police custody.

Fini “has finally come out into the open from his guerrilla warfare and has declared an open war,” James Walston, who teaches politics at American University in Rome, said in an e-mailed comment. “He succeeded once again in passing on the responsibility for early elections and potential chaos to Berlusconi.”

Berlusconi, 74, didn’t publicly respond to Fini’s speech. Ansa news agency reported that he told close allies he doesn’t intend to resign and if Fini wants the premier to go, he must vote against him in parliament and assume the responsibility for toppling the government.

‘Not Decisive’

“What’s happened today is important, but not decisive,” Defense Minister Ignazio La Russa said after Fini’s speech. “The final outcome will be decided in the parliament.”

Fini, who has enough backers in the legislature to deny Berlusconi a majority and bring down the government, did leave the door open for maintaining his support for the premier. He called on Berlusconi to negotiate a new, broader program for the rest of his term that ends in 2013 and to overhaul the country’s “shameful” election law. Italy’s election rules make it difficult for a party or coalition to win a majority in parliament, fueling political instability.

Fini threatened to pull his party members, including Deputy Industry Minister Adolfo Urso, out of the government as a first step should Berlusconi refuse to resign.

Under Italy’s constitution, Berlusconi’s resignation or the fall of his government wouldn’t necessarily lead to early elections. President Giorgio Napolitano would first consult with all the major parties to see if a new government could be formed either by Berlusconi or a combination of other political forces. Generally, such governments are temporary and given a mandate to carry out certain reforms before going to the polls. Napolitano has said that he wants to see the election law revamped before national elections.

‘Rubygate’

Calls for Berlusconi’s resignation have been growing since “Rubygate,” as the scandal over the underage girl has been dubbed. The woman, who dances in nightclubs under the name “Ruby Heartstealer,” had attended a party at Berlusconi’s residence near Milan, and said in a magazine interview that she had been given gifts and cash by the premier. She was later arrested in Milan on an unrelated theft charge. Berlusconi admits helping the girl, saying that he simply sent a friend to take custody of her upon her release.

“When you are a public figure, you need to set the example,” said Fini, 58, who also founded the post-fascist National Alliance party.

Early elections would be a risk for Fini as his new party lags behind Berlusconi in opinion polls. Berlusconi’s People of Liberty party remains the country’s most popular and would win 29.5 percent of the vote, according to an Ipsos Srl poll published Nov. 3 in Il Sole 24 Ore and conducted before the story of the girl’s release hit newspapers.

Poll Results

His coalition partner, the Northern League, would gain more than 11 percent, the poll found. That compared with 24 percent for the Democratic Party and 5.1 percent for Fini’s new party, according to the poll. Still, 45 percent of people questioned in a separate survey for state-owned RAI television last week said the premier should resign.

A new government, even with Berlusconi at the helm, would make it more difficult for him to obtain immunity from pending corruption trials or new charges, Walston said.

“Whatever he does, Berlusconi is a lame duck,” Walston said. “He has little or no control over special legislation to help him out of the criminal charges that he is facing.”

To contact the reporters on this story: Marco Bertacche at mbertacche@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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