EU Finance Chiefs Boost Italy’s Letta Amid Berlusconi Threat

Euro-area finance chiefs gave a boost to Italian Prime Minister Enrico Letta by calling for political stability in the country amid threats by Silvio Berlusconi’s party to topple the ruling coalition.

Berlusconi said last month that he would bring down the government in Rome should Letta’s Democratic Party vote to oust him from the Senate over tax fraud. The billionaire former premier softened his rhetoric a day later, saying he wasn’t issuing an ultimatum and wanted the coalition to continue. Still, allies including Renato Brunetta, chief whip of Berlusconi’s People of Liberty party in the lower house of parliament, have kept up the pressure.

Italy can’t afford political chaos as Letta pursues a budget-austerity goal and struggles to spur the nation’s economy. Italian industrial production unexpectedly fell in July, a sign that the euro region’s third-biggest economy may still be stuck in its longest recession since World War II.

“The Italian government has made very clear commitments,” European Union Economic and Monetary Affairs Commissioner Olli Rehn told reporters today in Vilnius, Lithuania, before a meeting of euro-area finance ministers.

“It’s moving forward and now it’s important that we all can avoid any political instability and instead concentrate on economic reforms, because that’s what Europe needs and that’s what Italy needs,” Rehn said. “It’s essential to maintain political stability in the country.”

Tax Fraud

The 17-nation euro area is trying to capitalize on its emergence from recession in the second quarter, seeking to prolong a period of market calm after three years of debt-crisis battles and 496 billion euros ($659 billion) in emergency aid pledges for Greece, Ireland, Portugal, Spain and Cyprus. Italy has so far avoided a bailout, pushing ahead with a goal to keep the budget deficit this year below the EU limit of 3 percent of gross domestic product.

Italian borrowing costs rose to the highest in almost a year yesterday at a sale of three, five and 15- year debt as investor concern about the country’s political stability persisted.

Berlusconi faces potential expulsion from Italy’s parliament because he was convicted of tax fraud and last month exhausted his final appeal. The Democratic Party, whose members opposed Berlusconi for almost two decades, has said the ouster is warranted under a 2012 anti-corruption law.

If Letta were to lose a confidence vote, it would be up to President Giorgio Napolitano either to seek a new majority or to dissolve parliament. Beppe Grillo’s Five Star Movement, the upstart anti-establishment party, is the biggest force in opposition. Grillo, a comedian-turned-political crusader, has ruled out alliances with other parties.

“The most important” thing in Italy “is political stability,” Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of euro-area finance chiefs, told reporters in Vilnius.

To contact the reporters on this story: Jonathan Stearns in Vilnius at jstearns2@bloomberg.net; Rebecca Christie in Vilnius at rchristie4@bloomberg.net

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

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