Italy Coalition Reels as Berlusconi Threatens to Sink Letta

Photographer: Alessia Pierdomenico/Bloomberg

Italian Prime Minister Enrico Letta has been struggling to contain tensions within the coalition government since Italy’s top court upheld Berlusconi’s tax-fraud conviction on Aug. 1. Close

Italian Prime Minister Enrico Letta has been struggling to contain tensions within the... Read More

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Photographer: Alessia Pierdomenico/Bloomberg

Italian Prime Minister Enrico Letta has been struggling to contain tensions within the coalition government since Italy’s top court upheld Berlusconi’s tax-fraud conviction on Aug. 1.

Italian Prime Minister Enrico Letta’s ruling coalition came under renewed strain as Silvio Berlusconi threatened to bring down the government if Letta’s party votes to expel the three-time ex-premier from the Senate.

“We’re not available to keep the government going if the left decides to prevent the head of People of Liberty from remaining in politics,” Berlusconi told a rally organized by the Army of Silvio supporters’ association on Aug. 30. He softened his rhetoric a day later, saying he “didn’t issue an ultimatum” and wants the government to continue to govern.

Letta has been struggling to contain tensions within the coalition government since Italy’s top court upheld Berlusconi’s tax-fraud conviction on Aug. 1. His Democratic Party, the biggest force in the coalition, has said Berlusconi’s expulsion from the Senate is required by an anti-corruption law enacted in December 2012.

Berlusconi’s People of Liberty, the second-biggest party, claims the law is unconstitutional and shouldn’t be applied to the former premier, whose conviction stems from tax fraud in 2002 and 2003. The party is pushing for a Constitutional Court ruling on the matter. The Senate’s committee for immunity and elections will start discussing the issue on Sept. 9.

Photographer: Alberto Lingria/AFP via Getty Images

Former prime minister Silvio Berlusconi said, “We’re not available to keep the government going if the left decides to prevent the head of People of Liberty from remaining in politics.” Close

Former prime minister Silvio Berlusconi said, “We’re not available to keep the... Read More

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Photographer: Alberto Lingria/AFP via Getty Images

Former prime minister Silvio Berlusconi said, “We’re not available to keep the government going if the left decides to prevent the head of People of Liberty from remaining in politics.”

Property Tax

The political brinkmanship drove the difference between yields on Italy’s 10-year debt and similar-maturity German bunds as high as 265 basis points on Aug. 28, the highest in almost a month. The spread narrowed by 8 basis points today to 246 at 11:16 a.m. in Rome. The FTSE MIB Index (FTSEMIB) was up 1.3 percent, as investors shrugged off political concerns.

“We believe the coalition government will stay in place for this year,” Royal Bank of Scotland Group Plc analysts led by Alberto Gallo wrote in a note to investors today.

Letta’s government last week passed cuts to an unpopular property tax, helping to ease tensions with Berlusconi, who had opposed the levy. The prime minister tried on Aug. 30 to separate the impending impeachment procedure against Berlusconi from the survival of his coalition.

“Anyone who draws improper connections between the Senate decision and the government will have to explain the meaning of these dangerous relations to the citizens,” Letta said in comments broadcast by SkyTG24.

Yet Berlusconi said it’s “absurd” to assume that the People of Liberty would remain in Letta’s coalition if the Democratic Party forced his removal from the Senate.

Senate Seat

“We’re not afraid of blackmail,” Democratic Party leader Guglielmo Epifani said Aug. 31, the Ansa news agency reported.

Meanwhile, the Corriere della Sera newspaper reported that some lawmakers from Letta’s party would be willing to allow an extension of the impeachment procedure, buying Berlusconi time to formulate his next move.

The process to strip Berlusconi of his Senate seat may take weeks or months before an eventual vote in the full chamber is called.

President Giorgio Napolitano on Aug. 30 named four senators-for-life, a move criticized by People of Liberty lawmaker Daniela Santanche, who said Berlusconi was more deserving for the post, which grants some legal immunity.

Roberto Calderoli, the Senate’s vice president and a member of the Northern League party that’s not part of the governing coalition, said the appointments indicate that plans may be afoot for a new Letta government with a different coalition of parties to support it, according to the party’s Facebook page.

New Election

If the current coalition falls, Napolitano could ask Letta or someone else to try to form a new government before calling a new election.

More than 10 members of the opposition Five Star Movement of comedian-turned-politician Beppe Grillo would back a new government led by the Democratic Party if Berlusconi topples the current coalition, European Parliament lawmaker Sonia Alfano said yesterday.

The February vote left Letta’s party with a majority in the lower house, while Berlusconi and Grillo each won a blocking majority in the Senate.

To contact the reporter on this story: Marco Bertacche in Milan at mbertacche@bloomberg.net

To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net

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