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Letta Returns to Italian Standoff Over Berlusconi Threat

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Former Italian Prime Minister Silvio Berlusconi
Former Italian Prime Minister Silvio Berlusconi, pictured, said on Sept. 19 that a government crisis would be negative for Italy now and that his party will continue to back Prime Minister Enrico Letta as long as he keeps to promises on tax cuts. Photographer: Franco Origlia/Getty Images

Sept. 27 (Bloomberg) -- Italian Prime Minister Enrico Letta will meet with President Giorgio Napolitano today to discuss the government’s prospects for survival after the resignation threat by Silvio Berlusconi’s lawmakers.

“As soon as I land in Rome, I will go to Napolitano to discuss how we can go ahead,” Letta told reporters in New York yesterday, ending a four-day visit to the U.S. marred by political bickering back home.

People of Liberty lawmakers led by Berlusconi are threatening to resign en masse if the former premier’s tax-fraud conviction leads the Senate to oust him. Letta’s Democratic Party, the largest group in parliament, has said the expulsion is required under a law passed last year. The standoff risks splitting the ruling coalition, which depends on Berlusconi for support.

“I want clarification to take place in front of citizens, and not in confined spaces,” Letta said. “Everyone has to take their responsibilities.” He added that he will discuss with the president whether to request a confidence vote of parliament to ensure that his government can continue.

By stepping down, lawmakers from the People of Liberty, known as PDL, “would hit the Parliament’s functionality at its roots,” Napolitano said yesterday in an e-mailed statement. “No 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.

’Serious Possibility’

Italy’s 10-year government bonds fell today, extend a weekly decline. The yield climbed 4 basis points, to 4.38. The country’s benchmark FTSE MIB Index fell 0.16 percent.

“There may be the possibility that if Berlusconi is expelled, we all declare ourselves expelled,” lawmaker Fabrizio Cicchitto told reporters Sept. 25. “It’s a serious possibility we’re taking into consideration.”

If Berlusconi’s lawmakers were to quit, those resignations would then need to be ratified by a majority in a parliamentary vote.

Letta said yesterday that he understands the “profound” unease in Berlusconi’s party, but reiterated that the former premier’s legal issues should not interfere with the life of the government.

Risk of Polls

“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 in a note to investors. “Napolitano could also threaten parties with his resignation to exercise additional pressure.”

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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