Feed: CNN.com - WORLD
Posted on: Tuesday, November 08, 2011 11:02 PM
Author: CNN.com - WORLD
Subject: Italy's Berlusconi to quit
Italian Prime Minister Silvio Berlusconi has said he will resign after the next budget is approved by parliament. The move marks a painful end to his long dominance of Italian politics. |
Italy's Berlusconi to resign as prime minister, president says
- Italy's president is expected to set out the next steps soon
- Berlusconi will resign after the next budget passes parliament, the president says
- The prime minister lost his majority in parliament in a budget vote
- Italian bond yields hit record highs
Rome (CNN) -- Italian Prime Minister Silvio Berlusconi has said he will step down after the next budget is approved by Parliament, a statement from the president's office said Tuesday, marking a painful end to his long dominance of Italian politics.
The news came hours after Berlusconi's government passed a key budget vote in the lower house but fell eight votes short of a parliamentary majority.
The office of President Giorgio Napolitano confirmed that Berlusconi had agreed to resign when the budget is confirmed by the Senate, after a meeting between the two men Tuesday evening.
Berlusconi "expressed his awareness of the implications of the result of today's vote in the House," the president's office said in a statement.
Napolitano is expected to give further details soon of what might come next, expected to be either the formation of a technocratic government or snap elections to be held in a couple of months' time.
Berlusconi has said he would prefer fresh elections to a technocratic government.
It is not known when the Senate will vote on the economic measures.
International concern has focused on Italy, the third-largest economy in the eurozone, in the past few weeks as analysts worry that the financial crisis centered on Greece might spread.
Although Italy is solvent, it holds a huge debt pile, and investors fear it may not be able to sustain that level of borrowing. As it is the world's eighth-largest economy, a meltdown would send shock waves through the global economy.
The European commissioner for economic affairs, Olli Rehn, described the economic and financial situation in Italy as "very worrying." He said a delegation would be sent from Brussels to Rome straight away, to meet Wednesday with ministers and senior civil servants.
It is not clear how soon Berlusconi will step down, but news of his imminent departure signals the end of an era in Italian politics.
The 75-year-old business tycoon has been a dominant force since forming his Forza Italia party in 1994.
He has weathered many crises, including sex scandals and corruption trials, in his three terms in office. But the loss of his parliamentary majority -- and with it his ability to command the government -- was a blow from which Berlusconi could not recover.
He had come under enormous pressure to resign in recent days, with what should have been a routine vote on the 2010 budget seen as a test of whether he still had the confidence of the government.
The budget passed with 308 votes, as all but one of those present in the lower house voted for the measure. The lone holdout abstained.
However, more than half of the country's 630 lawmakers did not take part in the vote, a clear indication that Berlusconi no longer has the backing of a majority in Parliament.
Opposition lawmakers chose to abstain as they did not want to prevent the budget being approved, since it is necessary for the government to function, but equally did not want to lend Berlusconi any support.
Italy agreed to implement structural reforms, intended to boost growth and cut spending, during a European Union meeting in Brussels last month.
Napolitano said the reforms must be put in place or risk Italy's credibility in the international community, raising questions over his confidence in Berlusconi's ability to see them through.
Berlusconi's main coalition partner added fuel to the fire Tuesday, saying he had asked Berlusconi to take a sideways step.
Umberto Bossi of the Northern League suggested that the prime minister should be replaced by former Justice Minister Angelino Alfano, although his office played down the remarks as "not the official line."
Without the support of the Northern League, Berlusconi was in a very difficult position.
Although Italy passed a package of austerity measures in September, including tax increases, some economists fear that without further reforms, its debts could become overwhelming, and there would not be enough money in the European rescue fund to bail it out.
There have been growing fears that Berlusconi's government no longer had the strength to push through the austerity measures needed to get the economy back on track.
These include tax increases and raising the retirement age by two years, to 67.
The markets are watching events in Italy closely, as the ripple effects of a crisis there would be far more serious for the global economy than a collapse in Athens.
Although Italy's economy is in much better shape than that of Greece, rising borrowing costs for the Italian government are adding to the pressure.
The nation, which has debts equal to about 120% of its economic output, has one of the largest bond markets in the world, worth an estimated 2 trillion euros (about U.S. $2.8 trillion).
Experts say the recent lofty interest levels are particularly concerning because the European Central Bank has been buying Italian bonds since the start of August. The move initially pushed yields below 5%, but that was short-lived.
Italian bond yields hit record highs Monday, getting perilously close to the 7% mark. The 7% level isn't an automatic trigger, but it is the level that prompted bailouts for Portugal and Ireland.
They spiked to 6.77% Tuesday after Berlusconi won the budget vote but lost his majority, while stock markets dropped.
Many protesters over the weekend called for Berlusconi to step down and said they want immediate elections. Others pushed for a technocratic transitional government to guide Italy through the difficult months to come.
Berlusconi said Friday at the G-20 economic summit that Italy had agreed to let the International Monetary Fund "certify" its reform program, a step designed to boost investor confidence.
CNN's Matthew Chance, Becky Anderson and Hada Messia contributed to this report.
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