Domestic and foreign pressures today led the Italian cabinet to rule unexpectedly in favor of immediately joining the new European Monetary System. The turnabout threatened the survivial of Premier Giulio Andreotti's minority Christian Democratic government.
The cabinet's decision came this morning at the close of a six-day "pause of reflection" called by Andreotti when he left Brussels last week without signing the Granco-German-sponsored agreement. It reportedly reflected new assurances of aid to Italy from her European allies.
At the same time, however, it appeared to have severely divided the five-party majority alliance that has supported the government in parliament since March.
Italy's second and third largest parties, the Communists and the Socialists, oppose EMS membership at this time on the grounds that the economy here is too weak to withstand the devaluation of the lira that is likely to follow participation in a system originally designed to coordinate the exchange rates of nine Common Market countries.
The lira is weaker than any other currency in the system, primarily because of stuctural and policy defects that have allowed the inflation rate here to climb 11 points higher than in West Germany and 6 points above the Common Market average.
Broad sectors of the ruling Christian Democratic Party have insisted instead on immediate membership. When French reluctance to aid in Italian development led Andreotti to return empty-handed from Brussels, Christian Democratic conservatives accused Andreotti of pandering to the Communist viewpoint.
The small but influential Republican Party also strongly favors immediate membership, saying acceptance of the new system's stringent monetary regulations would force Italy to put its economic house in order.
The Republicans had threatened to withdraw from the five-party alliance if Italy did not join on Jan. 1, and this prospect worries those Christian Democrats who feel the Republican pressence helps balance that of the left.
Today, Andreotti indicated acceptance of the Republican poisition by telling parliament that "Ital's participation in the European Monentary System is in line with the government's commitmnet to restabilize our economy, reduce inflation and increase our rate of economic growth."
Top-level political sources said tonight that although Andreotti's about-face on membership mainly reflected pressures from his party, renewed urgings from European political and business leaders also had played an important role.
Late last night, Andreotti spent 25 minutes on the phone with West German Chancellor Helmut Schmidt, who reportedly held out the prospect of substantial West German investment here and assured him that help from European national banks would be available to assist the lira in adjusting to the new system.
On Sunday, French President Valery Giscard d'Estaing called Andreotti and sought to convince him that Italian membership in the new system is essential if the system is to further European integration.
In Brussels, the French president had turned down Italian demands for a vast transfer of resources to the Community's weaker countries through the Regional Development Fund.
Yesterday Andreotti had other meetings with Yves le Portz, president of the European Investment Bank, and with Francois Xavier Ortoli, vice president of the Common Market Commission. Together, the Europeans appear to have convinced Andreotti that Italy could improve its position from within the system better than from outside.
"The creation of only a six-nation monetary system would lead to a two-tier community against which we have always fough," he told the Chamber of Deputies today. "The alternative would be a strengthening of protectionist tendencies and a revival of economic and political nationalism."
The cabinet's decision set off a two-day debate in the chamber which may be followed Wednesday by a vote of confidence.A "no" vote by the Communists, depending on how the montion is worded, would mean a govenment crisis and possibly new elections. But high-level sources said tonight that representatives of the five paties, who will meet with Andreotti Wednesday morning, already are trying to work out a compromise.
The outcome will depend on whether Andreotti, in reporting on his European contacts, can give the Communists an execuse to back down. "On the other hand, if the Communists bring down a govenment on an issue as dear to their hearts as that of Europe, they will really risk losing face," said one government insider.