Silvio Berlusconi resigns as prime minister amid Italian debt crisis

November 12, 2011

Silvio Berlusconi, who spent nearly two decades atop the world of Italian politics, resigned as prime minister Saturday night after lawmakers rushed through a budget bill seen as the first step toward winning back investor confidence and preventing the collapse of the world’s eighth-largest economy.

The resignation ends a political era punctuated by headlines of Berlusconi’s “bunga bunga” sex parties and allegations of corruption that polarized the nation. Ultimately forced out of office by a debt crisis instead of personal scandal, the flamboyant billionaire’s departure appeared to pave the way for a staid, serious economist, Mario Monti, to attempt to form an interim government and try to pull Italy back from the brink.

As a last act of the Berlusconi government — one he had demanded before resigning — a confrontational lower house gave final approval Saturday to a budget bill that was passed by the Senate on Friday and that contains measures insisted on by the European Union. But the bill is seen as only a precursor to a far more controversial and far-reaching economic package that observers hope Monti can push through in the coming weeks. The broader package’s passage will be vital, economists say, to kick-starting Italy’s moribund economy and quelling investor doubts about Italy’s ability to service its $2.6 trillion debt.

After the vote, Berlusconi, 75, rode to Rome’s grand Quirinal Palace, a former home of popes, to tender his resignation to Italy’s ceremonial head of state, President Giorgio Napolitano.

Berlusconi now tops a list of European leaders — including those in Greece, Ireland and Portugal — who have unceremoniously lost their jobs in the turmoil of the region’s two-year-old debt crisis. Crowds of demonstrators, responding to the momentous occasion, erupted in a joyous yell and waved Italian flags as news spread of Berlusconi’s resignation. One group sang choruses of “Hallelujah” to celebrate his departure.

Italian politicians were coming under intense international pressure — including from President Obama and French President Nicolas Sarkozy — to rally around a credible figure to lead a new unity government.

On Saturday, Italy’s notoriously divided political classes were in fierce negotiations over fresh leadership, with some still calling for snap elections that could leave Italy stuck in a power vacuum for months. But Monti, a 68-year-old professor and former European Commission member, still appeared to be the top candidate to head an emergency government.

Berlusconi was reported to be willing to throw his still substantial weight behind Monti if a number of conditions were met, including that the new government should exist only until the broader economic reforms are passed, after which new elections would be called. But his right-wing coalition partners, the Northern League, remained opposed to a unity government, and Berlusconi’s own party was divided, expressing deep resentment over global markets and foreign leaders seeking to influence Italian democracy.

For Berlusconi, a media mogul-turned-celebrity politician who challenged Catholic mores, the extraordinary events of recent days underscored the power of economics in politics. Although he came to power in the 1990s promising a free market revolution that would make Italy a dynamo in Europe, he has been criticized as having failed to fulfill that promise and as fostering a culture of tax evasion and cronyism that contributed to the loss of market confidence in recent weeks.

“I and others have always argued that Berlusconi’s scandals were not important to the electorate,” said Renato Mannheimer, chief of ISPO, one of Italy’s leading polling firms. “Had he succeed in delivering the economic reforms and the growth he once promised, Italians would not have cared what he did in his private life. But he failed.”

Berlusconi’s supporters insisted that although the longtime prime minister was down, he might not be out. Berlusconi is pushing his anointed successor, Angelino Alfano, 41, to be Italy’s next elected leader, and few observers rule out another run by Berlusconi at some point.

“On a human level, this is a very difficult moment,” Nunzia De Gerolamo, a lawmaker with Berlusconi’s People of Liberty Party, told Sky news. “Berlusconi represented for me and for many young people the hope of an Italy that could have been. With all due respect for Mario Monti, Berlusconi isn’t finished. The others shouldn’t be chanting victory.”

The budget bill that passed Saturday represents initial steps toward addressing Italy’s bloated state and lack of competitiveness. It would, for instance, raise the general retirement age from 65 to 67 by 2026, deregulate professions including architecture and engineering and offer tax breaks to companies that hire young apprentice workers.

But Emma Marcegaglia, head of the powerful industrial group Confindustria, called the just-approved package “not significant” compared with the larger reforms that Italy is under pressure to produce in relatively short order. For instance, although the bill passed this weekend raises the retirement age, it does not tackle the larger problem that Italian workers are allowed to retire after 40 years of service, meaning that some can start collecting pensions as early as their 50s. It also fails to address labor laws that make it tough for large companies to fire workers.

Those broader measures — likely to be far more hard-fought — are expected to be considered in the coming weeks.

“The markets are waiting for Monti to push through the significant reforms,” Marcegaglia said, “and it has to happen fast.”

Special correspondent Sarah Delaney contributed to this report.

Anthony Faiola is The Post's Berlin bureau chief. Faiola joined the Post in 1994, since then reporting for the paper from six continents and serving as bureau chief in Tokyo, Buenos Aires, New York and London.
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