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Italian Government On Brink Of Collapse?

  • Written by Syndicated Publisher 44 Comments44 Comments Comments
    October 26, 2011

    The EU has applied constant pressure on Italian prime minister Silvio Berlusconi for more austerity measures, more reforms, and more loss of sovereignty.

    This prompted a humiliated Berlusconi who has enough problems of his own to launch a verbal attack on EU officials stating “No one in the EU can nominate themselves as special administrators and speak in the name of elected governments and the European people. No one is in the position of giving lessons to his partners”.

    Today it should not be surprising to see the Financial Times report Italian government on brink of collapse

    Silvio Berlusconi’s centre-right coalition government in Italy appears in danger of collapsing over European Union demands for a demonstration of concrete action on economic reform by Wednesday’s summit of eurozone leaders.

    The EU ultimatum delivered to Mr Berlusconi in Brussels on Sunday risks breaking his coalition instead of giving it an external impetus to move ahead on measures to cut Italy’s debt and promote economic growth.

    The ultimatum was delivered as part of efforts to resolve the eurozone sovereign debt crisis, but the Italians’ failure to reach agreement on reform threatens EU leaders’ stated goal of finalising at Wednesday’s summit a comprehensive solution to the crisis.

    Talks on Tuesday morning between Mr Berlusconi and his Northern League coalition partners failed to resolve the deadlock – centred on proposed pension reforms – after negotiations into Monday night made little progress.

    The prime minister’s People of Liberty party has proposed that the pension age be raised to 67 years from 65 in line with increasing life expectancy, and that the system of length-of-service pensions also be modified. The Northern League is opposed and La Padania, its party newspaper, on Tuesday attacked what it called “euro-tyranny”.

    Berlusconi Government Already Collapsed

    If you apply enough pressure long enough something will break. It already has. Berlusconi’s coalition has failed, even though Berlusconi has survived several “votes of confidence”. The opposition and members of the coalition are simply waiting for the opportune time to dump him.

    Giorgio Napolitano, Italy’s head of state, a figurative position, warned Berlusconi to adopt the “new decisions of great importance” that he had promised.

    The Financial Times comments “Mr Napolitano, strongly pro-European and one of the few remaining Italian politicians to command widespread public respect, dismissed complaints of loss of sovereignty as irrelevant, noting that Italy had accepted limits to its sovereignty when it became a founding member of the European Union and later in joining its single currency.”

    Insufficient Votes

    How do you adopt “new decisions of great importance” when the votes are not there?

    Italy desperately needs pension reforms and an increase in retirement age. However, the time to work out such problems was when the Eurozone first formed.

    Now these structural reforms, forced austerity measures, and most importantly need to obtain common fiscal agreements come at a time of of political strife and a recession. Together with massive problems in Spain and Portugal, an unworkable EFSF (whether leverage is used or not), and recent decisions by the German Supreme Court, it is only a matter of time before the Maastricht Treaty itself collapses as unworkable.

    Mike “Mish” Shedlock

    Images: Flickr (licence attribution)

    About The Author

    Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.  Visit Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.