Berlusconi to Address Parliament Tomorrow After Vote Defeat

Prime Minister Silvio Berlusconi will defend his government in a speech to Parliament at 11 a.m. tomorrow and may seek a confidence vote after failing to muster a majority in a ballot in Italy’s lower house.

Chamber of Deputies Speaker Gianfranco Fini made the announcement in Rome today after President Giorgio Napolitano called on Berlusconi to demonstrate that he still has sufficient backing in the legislature to govern. Fini said he will discuss the matter with Napolitano today.

“Acute tensions in the government and in the ruling coalition” are sparking “questions and concerns,” Napolitano said in an e-mailed statement. The government needs to show it has the support “to carry out essential commitments, such as budget decisions,” he said.

The government stumbled yesterday in a routine vote to rubberstamp the 2010 budget, raising doubts about its staying power. Any confidence vote would come amid efforts by Berlusconi to convince investors he can cut Europe’s second-biggest debt and reverse surging borrowing costs that risk making Italy the biggest victim of the region’s debt crisis.

The government’s failure to get a majority in yesterday’s vote, which ended 290 to 290, meant the budget wasn’t approved. The tie could have been broken if Umberto Bossi, whose Northern League is in the ruling coalition, or Finance Minister Giulio Tremonti had been present at the ballot. Their absence sparked speculation that parliamentary support for the government may be unraveling as Italy relies on European Central Bank bond-buying to stem a jump in borrowing costs that’s pushed bond yields to euro-era records.

Photographer: Jock Fistick/Bloomberg

Italy's Prime Minister Silvio Berlusconi. Close

Italy's Prime Minister Silvio Berlusconi.

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Photographer: Jock Fistick/Bloomberg

Italy's Prime Minister Silvio Berlusconi.

Unclear Outcome

“The outcome of a hypothetical no-confidence vote is far from a foregone conclusion,” Vladimir Pillonca, senior European economist at Societe Generale SA, wrote in a note to investors.

The premium investors demand to hold Italian 10-year bonds over German bunds was at 354 basis points at 1:49 a.m. in Milan, the highest in a week. That compares with a euro-era high of 416 basis points on Aug. 5.

Tremonti has already clashed with Berlusconi over issues including last month’s 54 billion-euro ($73 billion) austerity package and Mario Draghi’s successor as Bank of Italy head. He was “engaged at the Ministry” in a review of economic policy during the vote, and was “represented by undersecretaries,” Tremonti said in an e-mailed statement. There was “no political reason of any kind” for his absence from the ballot, he said.

First Time

Newspapers including Il Sole 24 Ore reported that this was the first time an Italian government lost a vote on finalizing a previous year’s budget. While the incident doesn’t affect this year’s public finances, “it has symbolic importance as approval is required” by the nation’s constitution, Fabio Fois, a Barclays Capital economist in London, said in a note.

Also absent from yesterday’s vote was former Industry Minister Claudio Scajola. He and about 15 allies in Parliament are considering withdrawing their support for the government, affaritaliani.it website said today, citing lawmakers close to the group. Scajola is “ready to bring down the government,” the website said.

While Economy Undersecretary Alberto Giorgetti said the government will find a “technical solution” to the budget vote, opposition leaders including Anna Finocchiaro said the defeat in Parliament required Berlusconi to present his resignation to Napolitano.

As a result of the failed vote “the very preconditions for public-finance accounting no longer exist,” Finocchiaro, who heads the main opposition party in the Senate, said in an e- mailed statement.

To contact the reporter on this story: Chiara Vasarri in Rome at asarri@bloomberg.net

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

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