Italians Deal a Blow to Berlusconi as Referendum Passage Weakens His Grip

Prime Minister Silvio Berlusconi suffered his second electoral repudiation in two weeks as Italians voted to overturn legislation he sponsored, weakening his grip on power and increasing the chance of early elections.

Four referendum questions passed, none with less than 94 percent, to ban nuclear power, block cities from selling water companies and prevent Berlusconi from evading his corruption trials. The vote came 14 days after his bloc lost his hometown in an opposition sweep of local races across the country.

“It’s a second setback for Berlusconi’s coalition,” said Roberto D’Alimonte, professor of politics at Luiss University in Rome. “Two defeats don’t necessarily amount to a knockdown but, should the countdown start, Berlusconi will have to be able to stand up again on his feet and react.”

Supporters of the referendum galvanized anti-Berlusconi sentiment and attracted enough turnout to make it the first referendum to be binding since 1995. About 57 percent of eligible Italians voted, exceeding the threshold of 50 percent needed to make it stick.

“This has been a referendum on the divorce between the government and the country,” Pier Luigi Bersani, head of the main opposition Democratic Party, said at a press conference in Rome. He called on Berlusconi, 74, to resign immediately. His term, his third as premier, is scheduled to run until 2013.

Berlusconi Trials

The high voter turnout “demonstrates a willingness of citizens to participate in decisions about our future that can’t be ignored,” Berlusconi said in a statement. “The government and Parliament have the duty now to fully accept the outcome of the four referendums.”

As a result of the vote, Berlusconi will no longer be able to skip court dates in his corruption trials by claiming a conflict with official duties. Berlusconi is being tried in Milan for allegedly paying an underage nightclub dancer for sex. He also faces bribery, fraud and tax-evasion charges in three other trials related to his management of broadcaster Mediaset SpA (MS) before he entered politics.

Berlusconi’s attempt to pass a law giving him partial immunity from prosecution while in office was overturned by Italy’s Constitutional Court in January. The referendum does away with his remaining protection by forcing him to be in court if requested by prosecutors.

Berlusconi, who calls himself history’s most persecuted man, has accused Italian judges of trying to destroy him politically. By his count, he’s been targeted in 105 probes and trials, faced 2,500 court hearings and spent more than 300 million euros ($409 million) in consultant and legal fees. Prosecutors have never been able to make a conviction stick through Italy’s torturous appeals process, and he’s won two national elections while facing criminal charges.

Berlusconi did not immediately comment on the referendum.

Northern League

The setback may strain further Berlusconi’s ties with his key coalition ally, the Northern League, which has threatened to pull out of the government if they feel that the premier is a drain on their support. Confidence in Berlusconi fell to 31 percent in an IPR Marketing poll published in April, the lowest since his last election in 2008.

Berlusconi’s candidate lost the mayoral race in his hometown of Milan last month after putting himself on the list of candidates to try to muster support for the incumbent Letizia Moratti. Berlusconi’s candidates also lost in Naples and Turin.

Today’s vote means municipalities will be barred from selling off water services to private investors as part of a plan to finance the upkeep of the nation’s water grid. Opponents of the referendum said that the government will now have to come up with 60 billion euros ($86 billion) to invest in water services.

Share Reaction

Acea SpA (ACE), a Rome-based utility that had planned to double its investments in Italian water services to 900 million euros, fell as much as 2.7 percent, to 7.325, the lowest in almost seven months. Enel Green Power SpA (EGPW), an alternative-energy company that may benefit from the ban on nuclear power, added as much as 3.7 percent to 1.986.

The vote may weaken public finances at a time when concern over the euro-region’s second-largest debt has pushed up Italy’s financing costs. The risk premium investors demand to hold the country’s 10-year bonds over German equivalents reached a six- month high of 188 basis points today.

Italy’s credit-rating outlook was lowered on May 21 to negative from stable by Standard & Poor’s, which cited the nation’s slowing growth. The government plans an additional 3 billion euros in deficit-cut measures in 2011 to meet its goal of reducing its budget shortfall to 4 percent of gross domestic product, the premier said on June 9.

The League asked the premier and his Finance Minister Giulio Tremonti to speed up plans to overhaul the tax system and are pushing for tax cuts. Tremonti has resisted, saying there isn’t any money available to offset tax cuts.

“Pressure on Tremonti for tax cuts will grow now,” said D’Alimonte. “Still, the government has to meet the goals on deficit cuts agreed with the European Union and at the most the Finance Minister will be able to concede some cosmetic changes on the economic policies.”

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

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.