Monti hit by Berlusconi party vote
Concerns over the stability of the Italian government are growing after Silvio Berlusconi's party withdrew its support, threatening to bring a premature end to Premier Mario Monti's ambitious reforms programme.
Mr Berlusconi's centre-right PDL party abstained from a confidence vote in the Senate on Thursday. Though Mr Monti's government of unelected technocrats won the vote by 127 to 17, investors fear the move heralds a period of political uncertainty in the run-up to planned elections next year.
Many credit Mr Monti with restoring some investor confidence in the country, pulling it back from the edge of financial disaster. "There is the whiff of crisis," political scientist Roberto D'Alimonte, of Rome's LUISS University, said on Sky TV 24. "We will see in the next hours."
Another confidence vote in the lower house is due later. Mr Monti's government has survived numerous confidence votes in the year since it took office. But the political situation has grown particularly tense in recent weeks as campaigns intensify to elect a new government early next year, when Mr Monti's mandate expires.
PDL politician Fabrizio Cicchitto said the party was expressing its dissent on the government's economic policies: "We have decided to give our assessment and to give a negative appraisal."
As financial markets dropped on the news, president Giorgio Napolitano, who tapped Mr Monti last year after Mr Berlusconi failed to persuade markets he could protect Italy from falling prey to the debt crisis, urged calm. "It is necessary to co-operate responsibly on an orderly, not precipitous and not convulsive, conclusion of the legislature," Mr Napolitano said in a statement.
While the centre-left Democratic Party, or PD, has been invigorated by recent primaries, Mr Berlusconi's party is in disarray. The 76-year-old three-time premier has hinted that he will run again, despite earlier bowing out to give room to a younger candidate. Recent polls show the PD with a minimum of 30% and Mr Berlusconi's PDL party trailing with less than 15%.
"Certainly, today's PDL decision to withdraw its support for Mr Monti is significant and tends to confirm that the next few months will be bumpy for the Monti government," said Unicredit analysts Chiara Corsa and Loredana Federico.
After a period of seeming calm over Italy, investors have returned their focus to the country. Though the government is expected to win the second confidence vote, the developments highlight the fragile nature of the consensus in Italy over Mr Monti's economic reform programme, which includes liberalising the labour market and increasing the pension age.
The Milan stock exchange fell on Thursday, with the benchmark FTSE MIB trading 0.7% lower, in contrast to most of Europe's main indexes, which were trading higher. The worries were evident in the bond markets too, where the yield on the country's 10-year bonds rose by 0.11 percentage points to 4.51%. The Italian economy, the third-largest of the 17 European Union countries that use the euro, is in recession as the government enacts tough measures to get a handle on its debts. Italy has the second-highest debt level as a percentage of its GDP in the eurozone. Only Greece's debt is higher.