Italy PM Letta faces showdown in parliament after Berlusconi crisis

Reuters with CNBC.com
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Silvio Berlusconi fought to hold his fractious center-right party together on Tuesday, a day before a showdown in the Italian parliament that will decide whether Prime Minister Enrico Letta can survive in office.

Letta will seek support in parliament to continue at the head of a solid government next year, President Giorgio Napolitano said in a statement on Tuesday after a meeting with the prime minister.

Letta is due to outline a program of priorities in a speech to parliament on Wednesday and is expected to call a confidence vote afterwards.

Napolitano said Letta would seek "stable commitment for continuing government action from the most immediate deadlines to objectives to be pursued in 2014".

The move comes as Berlusconi's People of Freedom party (PDL) is on the brink of splitting, after the 77-year-old media tycoon pulled his ministers out of the ruling coalition at the weekend.

Tensions have risen markedly since Berlusconi was convicted of tax fraud in August, opening the way for him to be expelled from parliament. He has threatened repeatedly to bring down Letta's government and is pressing for new elections.

The uncertainty over the confidence vote adds another level of complication to an exceptionally confused situation with a group of 20 or more PDL dissidents considering forming a breakaway group that could support the government.

Letta's Democratic Party (PD) has a commanding majority in the lower house but in the Senate it would need a couple of dozen votes from the PDL or opposition parties including the anti-establishment 5-Star Movement.

The parliamentary arithmetic is complicated and deceptive but to be sure of winning the vote, Letta, who can count on 138 votes from the PD and centrist parties, would need at least 20 more votes for a majority in the 315 seat Senate.

However the premier has made it clear that scraping through a confidence motion with a handful of votes will not be enough to be able to implement reforms and control public finances.

Moderate so-called "doves" in the PDL, including former Constitutional Reform Minister Gaetano Quagliariello, former Labour Minister Maurizio Sacconi, or former lower house floor leader Fabrizio Cicchitto, have expressed open disagreement with Berlusconi's hardline approach.

They have called for a new direction in the center-right and the removal of the ultra-hardliners who have gained increasing influence over Berlusconi in recent weeks.

But it is not clear whether Berlusconi, a billionaire who has dominated the center-right for 20 years, will be able to persuade potential rebels to return or whether the breakdown in his party is final.

"The so-called 'traitors' are certainly there, ready to break away from Berlusconi. The question is, do they have the courage to go through with it? That's something that's still unclear," said one former center-right minister.

The PD sources said Letta would speak in parliament on Wednesday but would not decide whether to call a formal confidence vote or hand in his resignation to Napolitano at the presidential palace until after the debate on his speech.

"If the speeches of Quagliariello, Sacconi and the various others are tepid, Letta would avoid the confidence vote and go directly to the Quirinale," one of the sources said.


In a gesture to the moderates, Daniela Santanche, a ferocious Berlusconi loyalist nicknamed "the python" for the venomous treatment she deals out to enemies, offered to stand aside in the interests of party unity.

But most interest focused on the likely attitude of PDL secretary Angelino Alfano, once seen as Berlusconi's heir who has come close to breaking with his patron over the decision to pull the ministers out.

"Alfano will be vital in all this. If he goes, the others will go with him. If he doesn't, the whole thing could fizzle out and there will be only a handful of rebels left," the former minister said.

As the countdown to the vote began, official figures showed youth unemployment had hit a record of 40.1 percent in August, underlining the dire state of the Italian economy, now in its second year of recession.

The political chaos in Italy has revived memories of the turmoil which brought down Berlusconi's last government at the height of the euro zone debt crisis in 2011 and there was little confidence that even if Letta survived a confidence vote, he would have enough support for a solid government.

Financial markets have watched developments in Rome closely and Italy's borrowing costs have risen markedly although with the European Central Bank pledging to support euro zone bonds, there has been no sign of the panic seen in earlier crises.

"In the end if Letta is able to get a short term agreement, if he is able to postpone elections for a few months, then that is a positive result for him and

there would be a positive reaction by the markets," said Leonardo Morlino, professor of political science at LUISS University in Rome.

Letta's unwieldy coalition of left and right has struggled ever since it was formed in the wake of last February's deadlocked elections which left no party able to govern alone.

With Italy's complicated voting system widely expected to produce another stalemate if snap elections were held now, Napolitano has repeatedly said he does not want to dissolve parliament and call a new ballot.

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