Italian President Says Threat by Berlusconi Allies ‘Unsettling’

Italian President Giorgio Napolitano said he is worried about a threat by Silvio Berlusconi’s lawmakers to resign en masse if the former premier’s tax-fraud conviction leads the Senate to expel him.

By stepping down, the lawmakers of People of Liberty Party, known as PDL, “would hit the Parliament’s functionality at its roots,” Napolitano said today in an e-mailed statement. “Not less unsettling would be the intent to act that way in order to put pressure on the president to dissolve Parliament” and call early elections, he said.

The announcement yesterday of possible resignations after a PDL party meeting builds on Berlusconi’s threat in August to bring down the government of Prime Minister Enrico Letta, who ends his visit to the U.S. today. Letta’s Democratic Party, the largest group in parliament, has said the expulsion is required under a law passed last year. The standoff on Berlusconi risks splitting the ruling coalition, which depends on the former premier’s lawmakers for support.

“There may be the possibility that if Berlusconi is expelled, we all declare ourselves expelled,” lawmaker Fabrizio Cicchitto told reporters late yesterday. “It’s a serious possibility we’re taking into consideration.”

Italy’s 10-year government bonds fell for the first time in nine days amid the risk the coalition government will collapse. The yield climbed 9 basis points, or 0.09 percentage point, to 4.32 percent at 1:58 p.m. in Rome. That was the biggest jump in three weeks. The country’s benchmark FTSE MIB (FTSEMIB) Index fell as much as 2.2 percent, the most in one month, making it the worst performer in Europe.

Vote Risk

“Napolitano will spare no efforts to try to build a new parliamentary majority to avert the risk of snap polls” if the PDL withdraws its support to Letta, Wolfango Piccoli, an analyst with Teneo Intelligence in London, said today in a note to investors. “If pushed to the limit, Napolitano could also threaten parties with his resignation to exercise additional pressure.”

Napolitano canceled his attendance at an event in Rome, Italian news agency Ansa reported earlier today, citing a message sent to participants. In his e-mailed statement the president also said that Berlusconi’s conviction is “not a coup” and that verdicts must be carried out. If Berlusconi’s lawmakers were to quit, those resignations would then need to be ratified by a majority in a parliamentary vote.

Tax Promises

Berlusconi, who turns 77 this weekend, said on Sept. 19 that a government crisis would be negative for Italy now and that his party will continue to back Letta as long as he keeps to promises on tax cuts. A motion to halt expulsion proceedings against Berlusconi was rejected that day in a committee vote at the Senate, paving the way for a possible showdown.

“The prime minister is in New York to represent Italy in front of the UN and world markets,” Democratic Party Leader Guglielmo Epifani said in a statement yesterday. He said the “decisions and incredible noises from the PDL are further proof of its irresponsibility.”

A public hearing of the Senate panel on Berlusconi’s case was set for Oct. 4 to allow the media tycoon-turned-politician a forum to present his defense. After that, the committee will decide whether to put the matter before the full Senate for a final vote.

Tensions between Berlusconi’s allies and the government have grown this month after People of Liberty’s lawmakers said Finance Minister Fabrizio Saccomanni needs to find a way to avoid a value-added tax increase planned for Oct. 1. In an interview with Bloomberg Television’s Erik Schatzker this week Letta declined to say whether he will stop the levy’s increase.

To contact the reporters on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net; Andrew Frye in Rome at afrye@bloomberg.net; Chiara Vasarri in Milan at cvasarri@bloomberg.net

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

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