Berlusconi Refuses Former Ally's Fini's Demand to Step Down, Official Says

Italian Prime Minister Silvio Berlusconi will reject his former ally’s demand that he resign, his chief spokesman said, escalating a political crisis that threatens the survival of his government.

Gianfranco Fini and his Future and Liberty for Italy party should vote against Berlusconi in parliament and assume the responsibility for toppling the government if he wants Berlusconi to go, Paolo Bonaiuti said today at a conference in Rome. Fini, speaker of the lower house of parliament, has enough support in the legislature to deny Berlusconi a majority.

Fini said in a nationally broadcast speech on Nov. 7 that he would pull his allies out of the government if Berlusconi refused to step down and agree to a new governing program and to broaden the administration to include an opposition party, the Union of Centrists. The rift between Berlusconi and Fini, who co-founded the ruling People of Liberty Party in 2008, has deepened since Fini broke with Berlusconi in July to set up his new formation and challenge the premier’s leadership.

Berlusconi has not publicly commented on Fini’s ultimatum. Umberto Bossi, the head of the Northern League, Berlusconi’s closest coalition ally, said today on a visit to the flood- damaged Veneto region, that the prime minister had given him a mandate to try to negotiate with Fini to find a way out of the impasse.

Underage Girl

Berlusconi’s governing coalition has been under growing strain since media reports last month that Berlusconi intervened to free an underage girl from police custody. The 74-year-old leader admitted to helping the girl, who had attended a party at one of his private residences near Milan.

Opposition leaders called for Berlusconi to step down and former Prime Minister Massimo D’Alema, who is the chairman of a parliamentary committee on security, has requested he appear to discuss security issues related to the parties. Berlusconi’s resignation or the collapse of his government wouldn’t necessarily lead to early elections. Italian President Giorgio Napolitano would first consult the political parties to see if another government could be formed with or without Berlusconi as its head, before calling for a vote.

The rising political tensions within Berlusconi’s coalition come at a time when the Parliament needs to approve the government’s budget plan, which includes spending cuts worth 13 billion euros ($18.1 billion) aimed at reducing the country’s deficit which topped 5 percent of gross domestic product last year.

Risk Premium

Berlusconi has repeatedly said that Italy can’t afford the political instability caused by an election campaign at a time when investors are shunning the bonds of Europe’s so called peripheral countries. The spread or yield premium investors demand to hold Italian 10-year bonds over similar maturity German bonds rose 6 basis point today to 169.4 basis points, the highest in five weeks.

Italy’s ratings “could come under downward pressure if political instability were to impede the implementation of the current” budget plan, Standard & Poor’s said in a Nov 2 report.

Napolitano called on the government’s partners to meet the budget plan’s “mandatory commitments,” in a statement posted on the Presidency’s website last night.

Finance Minister Giulio Tremonti will meet with members of the coalition’s parties in parliament today to discuss possible changes to the measures included in the plan.

Leads in Poll

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 Berlusconi’s intervention to ensure the girl’s release hit newspapers. That compared with 24 percent for the main opposition Democratic Party. The Northern League would gain more than 11 percent, the poll found. Fini’s party had the support of 5.1 percent, the poll said.

“Nobody wants elections right now, apart from Berlusconi and the League and even for them that could be a big gamble,” said Roberto D’Alimonte, a professor of politics at Luiss University in Rome. “For Fini and the Democratic Party elections would be a difficult test. For Berlusconi and his allies there would be the risk of a hung parliament without a majority in the Upper house.”

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net

To contact the editors responsible for this story: John Fraher at jfraher@bloomberg.net

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