Italian PM urges cool heads ahead of vote on Berlusconi

Italy's economy cannot afford instability based on political games, Letta warns

PUBLISHED : Monday, 16 September, 2013, 12:00am
UPDATED : Monday, 16 September, 2013, 4:47am

Italian Prime Minister Enrico Letta has appealed for political stability ahead of a week that could signal the end of his government, warning a political crisis would push up borrowing costs and throw Italy into chaos.

"I want to send a very strong message here, we can no longer afford this instability based on political games," Letta said at a convention of the centrist UDC party in the Tuscan town of Chianciano on Saturday

"Everything depends on stability, without stability we have no chance of pulling through," he said, stressing that hopes of economic recovery and fiscal consolidation would be scuppered if his four-and-a-half-month-old government fell.

On Wednesday, a Senate panel will vote on whether Silvio Berlusconi should be expelled from parliament following a conviction for tax fraud, and the media tycoon's allies have threatened to sink the government if the vote goes against him.

Letta's left-right coalition, which needs the backing of Berlusconi's People of Freedom party to survive, has bickered since it was formed in April but the infighting has intensified since Berlusconi was sentenced last month.

Letta said he was "absolutely convinced" that Berlusconi would not bring his administration down.

"My forecast is that, the day after, nothing will happen that will put the government in crisis," he said. "No one will take responsibility for throwing everything up in the air and then having to explain what they have done to the Italians."

Letta said the political uncertainty of the past few weeks had already raised Italy's borrowing costs, but he staked his credibility on Italy meeting its budget deficit target of 2.9 per cent of output this year.

"We won't just do our best to meet the target, we will meet it, full stop. Credibility is everything. We have promised to do it and we will do it," he said.

Economy Minister Fabrizio Saccomanni used similarly categorical terms at a meeting of EU finance ministers in Vilnius on Friday to respond to growing concerns in Italy and among its European partners that the deficit is overshooting.

"We will do whatever it takes, and believe me it will be enough," Saccomanni said, deliberately echoing the words used by European Central Bank president Mario Draghi last year in his vow to end the euro zone's debt crisis.

The pledges by Letta and Saccomanni suggest emergency deficit curbs will be imposed when Italy presents its 2014 budget plan next month. Data to the end of August point to a fiscal gap significantly higher than in 2012, when it came in at 3 per cent of output, bang on the European Union's limit.

Letta warned that one consequence of the fall of his government would be that the budget would be "written by Brussels" and would inevitably be far more draconian than his own plans.

Wednesday's vote is not the final stage in the debate on Berlusconi's fate, which must eventually go to a full vote on the Senate floor, but Berlusconi may choose to act pre-emptively as soon as he sees the majority is against him.

Nearly three-quarters of Italians think the ex-prime minister should be barred from the Senate, according to a poll by the SWG institute for the state television station RAI. A separate SWG poll indicated that approval of Letta's government had risen to 29 per cent from 25 per cent a week ago and his personal approval rose to 41 per cent from 40.