As I mentioned here, Italy have called in the International Monetary Fund (IMF), but no money has changed hands, according to Berlusconi… Tonight, following a technical vote which saw Silvio Berlusconi lose his parliamentary majority, and with rising yields on Italy’s 10-year benchmark bonds, the Italian Prime Minster has “confirmed he intends to resign after key economic reforms have been approved.”
Speaking on TV, the [Italian] prime minister said he would have preferred to call early elections but the final decision rested with President Giorgio Napolitano.
“Once this finance law is approved, along with the amendments on everything which Europe has asked of us and which the Eurogroup has asked for, I will resign, so that the head of state can open consultations,” he said. [added emphasis]
The BBC’s Alan Johnston in Rome says there has been speculation that an interim government of technocrats might be ushered in, a move that Mr Berlusconi clearly opposes.
But the question of who led the government was less important than doing “what is right for the country”, Mr Berlusconi added.
Earlier, President Napolitano announced the decision in a statement.
“Once this engagement is fulfilled, the prime minister will hand in his mandate to the head of state who will proceed with appropriate consultations, paying close attention to the positions and proposals of all political forces,” he said.
Mr Berlusconi had shown “his awareness of the implications of the results of today’s vote” as well as “concern for the urgent need to give prompt answers to the expectations of European partners”, Mr Napolitano added.
The end of an era?
Update His pledge to resign doesn’t appear to have convinced the markets. As the Irish Times reports
Italian bond yields hit record highs today as prime minister Silvio Berlusconi’s pledge to step down as soon as his government’s austerity budget is approved by parliament failed to calm markets
Markets showed little or no relief that a man they saw as an obstacle to economic reform planned to leave office. The yield on Italy’s 10-year benchmark bonds rose sharply to 7.02 per cent, the highest since the euro was founded in 1999 and over the 7 per cent level widely seen as unsustainable at which Portugal, Greece and Ireland were forced to seek a bailout.
The Guardian business live-blog asks why
So why didn’t Berlusconi‘s resignation calm the markets, rather than creating more alarm? There are three main reasons:
1) The political uncertainty. Berlusconi has promised to go, but he hasn’t actually quit. He indicated this morning that he still favours early elections — but that would mean a lengthy campaign and no promise of a clear victor at the end.
Investors would much prefer some kind of unity government who could press on with the urgent task of bringing in economic reforms. Not just pass a budget this month – actually implement it.
2) Europe’s own confusion. The deal agreed two weeks ago in Brussels looks less impressive by the day. The plan to extend the European financial stability facility to €1trn is floundering because the rich emerging markets are unwilling to provide the funds.
3) Italy’s financial position. Its national debt is approaching €2 trillion, giving a debt-to-GDP ratio of 120%. Too big to bail?
The failure of the G20 to make serious progress in Cannes last week could now rebound on them.
Italy was expected to auction €5bn of government debt on Thursday – government sources were insisting yesterday that it will still go ahead….