Berlusconi Ministers to Quit Today in Move That May Speed Early Elections

Four top officials from Italian Prime Minister Silvio Berlusconi’s government, including a Cabinet minister, will resign today in a move designed to down his administration and possibly trigger early elections.

The four are members of the new Future and Liberty for Italy Party formed by Speaker of the Chamber Gianfranco Fini who first broke with the premier in July and then called for his resignation earlier this month. Berlusconi acknowledged the defections in an e-mailed statement on Nov. 13 and said he would call confidence votes in both houses of parliament once the 2011 budget is passed to see if he still has enough support to govern.

“Starting from Monday, the government cannot rely on the support” of Future and Liberty, Benedetto Della Vedova, a founder of the party, said in an interview on Nov. 12. “This is not our government anymore.”

Tensions between Berlusconi and Fini, who co-founded the premier’s ruling People of Liberty Party in 2008, exploded at a time when parliament needs to approve the government’s budget plan. It includes spending cuts worth 13 billion euros ($17.8 billion) aimed at reducing a deficit that topped 5 percent of gross domestic product last year.

Della Vedova also said that the government won’t fall before passage of the spending plan. The budget faces it first vote in the Chamber of Deputies this week and should receive final approval by the middle of December.

Photographer: Jock Fistick/Bloomberg

Silvio Berlusconi, Italy's prime minister, arrives for the European Summit at the EU headquarters in Brussels, on Sept. 17, 2009. Close

Silvio Berlusconi, Italy's prime minister, arrives for the European Summit at the EU... Read More

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Photographer: Jock Fistick/Bloomberg

Silvio Berlusconi, Italy's prime minister, arrives for the European Summit at the EU headquarters in Brussels, on Sept. 17, 2009.

‘Move of Wisdom’

“The likelihood of new elections in the near future is now pretty high,” Natacha Valla, an economist at Goldman Sachs in Paris wrote in a note to investors. “Yet, in a general move of wisdom, the entire political class agreed to postpone any formal step that would precipitate early elections until after the finance law has been passed, showing full awareness of the fact that an open political crisis before securing the 2011 budget would be utmost unwelcome in the context of heightened market anxiety regarding public finances in the euro zone.”

The yield premium investors demand to hold Italian 10-year bonds over similar-maturity German bonds rose to a euro-era record of 180.9 basis points on Nov. 11 as concern that Ireland and Portugal may follow Greece in having to seek a European Union-led bailout hurt bonds of other so-called peripheral countries. The spread fell 5.7 basis points today to 159.

Berlusconi, 74, may have enough support in the Senate to survive a confidence vote. In the Chamber of Deputies, the lower house, enough lawmakers defected with Fini to deny Berlusconi a majority and topple the government. Even if the government fell, early elections are not a certainty.

Consultations

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. While Berlusconi’s popularity has declined to near record lows since his 2008 election, Polls indicate that he might win a vote without Fini and secure a majority in at least one of the two houses of parliament.

The confidence votes may coincide with a decision by Italy’s Constitutional Court set for Dec. 14 on the validity of a law passed by the government granting Berlusconi and other top officials immunity from prosecution while in office. Should the court rule against the premier, his pending corruption trials could resume. The biggest threat to Berlusconi comes from a Milan court that has already convicted his co-defendant in the case.

The Milan court is trying Berlusconi for allegedly paying $600,000 to U.K. lawyer David Mills to lie under oath on his behalf. The criminal charges against Mills were thrown out in February because the statute of limitations had expired. Civil charges against Mills were upheld along with a 250,000 euro damage payment. Berlusconi denies any wrongdoing in the case and has said that judges are trying to destroy him politically.

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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