The Dow Jones industrial average, the S&P 500 stock index and the tech-heavy Nasdaq each closed down more than 3 percent Wednesday. Italy’s benchmark index dropped 3.8 percent, while Germany’s DAX and France’s CAC-40 each fell 2.2 percent.
Investors appeared to be weighing several immediate factors, notably the prospect that Berlusconi’s departure — contingent on parliament passing austerity measures — could drag on for weeks. But even after Berlusconi goes, Italy will still need to come to grips with a $2.6 trillion pile of debt and a moribund economy that has wallowed for years in low or negative growth.
Concerned executives in Italy’s financial industry were pushing for fast action, saying a package of reforms required by the European Union must not, as some in Berlusconi’s party have suggested, take weeks to pass. Rather, they called for dramatic acceleration of the process to calm market fears, suggesting that Italian lawmakers should vote as soon as this weekend.
To ease markets, Italian politicians were also racing to take up key austerity and economic measures, which could go before the upper house as early as Friday and the lower house as soon as Saturday. That would mean Berlusconi could step down by Saturday night.
Italian President Giorgio Napolitano on Wednesday named Mario Monti, a former appointee to the European Commission, as a senator for life. The moved fueled speculation that politicians would rally around the noted statesman as a possible head of a new unity government after Berlusconi leaves office.
“We believe that the [borrowing rate] spread can go back to more normal conditions if we pass the reforms package this weekend and see a resolution with Berlusconi going forward with his statement to step down,” said Giovanni Sabatini, general manager of the influential Association of Italian Bankers in Rome. “This is what has to happen. With the market as it is, we cannot wait weeks.”
It was a testament to Berlusconi’s declining credibility that some in the opposition, as well as more than a few investors, were not immediately taking the prime minister’s word that he would resign. But Napolitano, Italy’s ceremonial head of state, reiterated Wednesday that there is no going back for the prime minister.
“There is no uncertainty about Berlusconi’s resigning,” Napolitano said.
In an interview with La Stampa newspaper published Wednesday, Berlusconi additionally vowed not to run again in the nation’s next elections. “I won’t run for office,” he said, adding that the decision made him feel “liberated” and that he might go back to running his soccer club, AC Milan.