Monti Clings to Power as Berlusconi Seeks Early Vote

Italian Prime Minister Mario Monti said he plans to keep his government intact as his biggest parliamentary supporter, billionaire media magnate Silvio Berlusconi, threatens to withdraw his backing.

The two have put the dispute in the hands of President Giorgio Napolitano, who met today with the general secretary of Berlusconi’s People of Liberty Party, Angelino Alfano. Neither side made comments after the meeting Monti’s government, which will expire by May, survived two confidence votes yesterday after People of Liberty, or PDL, gave its partial support. .

“We’re doing our ordinary work,” Monti told reporters yesterday after a six-hour Cabinet meeting in Rome. “I have been in touch with the president of the republic and I am awaiting his evaluation.”

Berlusconi’s challenge pushed Italian bond yields higher and will test Napolitano’s resolve to get results out of lawmakers who have already begun campaigning. Napolitano, whose term also ends next year, is pressing parliament to pass the budget and a new election law before considering the request to dissolve the government before its expiration. Alfano has said the PDL will support the budget.

“I suspect that Napolitano doesn’t want the end of his mandate to be colored by bowing to Berlusconi’s wishes,” said Peter Ceretti, an analyst at Eurasia Group in New York. Napolitano is “not going to be particularly conciliatory if he doesn’t have to,” Ceretti said.

PDL’s Slide

Berlusconi, 76, is seeking to halt the PDL’s slide in opinion polls and reassert his control in the party after being convicted of fraud by a Milan court in October.

The challenge yesterday cost Berlusconi the support of former Foreign Affairs Minister Franco Frattini, who broke from the PDL and voted with the government in the lower house of parliament.

Support for the PDL slipped to 18.2 percent from 23.5 percent in March, according to a poll by Demos & Pi published in newspaper La Repubblica today. The Democratic Party saw its backing rise to 37.8 percent, the highest since its founding in 2007, the poll showed.

Bonds Decline

The yield on Italy’s benchmark 10-year bond rose 4 basis points to 4.62 percent, extending yesterday 13-point gain, the biggest one-day increase since Sept. 10. The difference with comparable German bunds rose by 4 basis points to 332 basis points. Italy’s benchmark FTSE MIB stock slipped 1 percent after slipping 0.8 percent yesterday, when it was the only decliner among Europe’s main indexes.

“Markets are still sensitive to Italian political risk,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “Mr. Berlusconi’s attempt to undermine the Monti government is mostly about his own political calculations, but is also a symptom of the implosion of Italy’s center- right.”

The PDL insurgency came less than 12 hours after Berlusconi, who was forced to resign the premiership in November 2011, announced he was considering another run for prime minister. Monti postponed his morning cabinet meeting and rushed to the Senate to oversee the confidence vote on a stimulus bill after Maurizio Gasparri, the PDL’s whip in the chamber, said his forces would move to a “position of abstention.”

The move was more symbolic as PDL appeared to have the numbers to block the vote and bring down Monti’s government. Abstentions by PDL senators gave Monti a quorum, without which the vote would have failed.

Anti-Austerity

Berlusconi is cultivating an anti-austerity message to contrast with Monti before the general election. Still, the differences between the two extend beyond policy. Berlusconi, whose recent fraud conviction carries a four-year prison sentence that was put on hold pending appeal, staged his challenge just as Monti’s Cabinet was passing a plan to ban some lawmakers convicted of crimes from serving in parliament.

Berlusconi is currently standing trial on charges of abuse of power and engaging a minor in prostitution, allegations he has denied.

The strain of supporting Monti’s unelected technocrat government has shown among members of the ruling coalition beyond the PDL. Pier Luigi Bersani, general secretary of Italy’s Democratic Party, has appealed to voters by pledging to re- evaluate Monti’s budget-saving pension law changes. Berlusconi is seeking a broader rollback of Monti’s austerity policies.

Monti has said that while he won’t run for reappointment, he will be available to serve if called on after the election.

To contact the reporter on this story: Andrew Frye in Rome at afrye@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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