Italian Politics Moves On

The Italian media is reporting that Berlusconi will go today.  He has gone to Milan but will be returning to Rome this evening.

Whether this turns out to be correct or no, political debate rages now on whether there should be early general elections (Italy has fixed term parliaments and elections are not due until 2013); whether another centre right politician should be asked to form an administration and put it to a parliamentary vote of confidence (but the centre right coalition elected in 2008 has collapsed and reformed so often that it is hard to argue that the original election-winning grouping exists any more); or whether a 'technical' government be formed to put in place the measures promised by Italy to deal with public debt.

This last would face real difficulties in achieving a parliamentary confidence vote because of the unpopularity of all and any debt-cutting measures.   In truth it is a fig leaf to hide the installation of a centre left administration that runs  against the democratic vote of the last elections.


So unpopular are reforms proposed, and required by lenders, to various parts of the electorate, and so unpalatable the likely further measures that would be brought in by a centre left 'technical' government (wealth taxes, levies on current accounts, worsening of pension rights etc.) that it is hard to see any democratic way of resolving decisions on the choices for cutting state debt other than by holding early elections.  Furthermore, before proceeding to general elections there is a pressing need to reform the electoral rules (known as the porcellum - the pig's breakfast) introduced before the last elections which place the choice of candidates on the party lists entirely in the hands of party leaders (hence showgirls reborn as waged and expenses-endowed politicians, and other corruptions).

President Napolitano has held extensive consultations with all political parties in the last week.  The President is required to consult with specific people - previous presidents, constitutional advisers etc., but in the end, apart from the need for a caretaker administration to return the electoral rules to their pre-porcellum form, only a general election can assure the markets that the people have consented to the measures about to be visited upon them.

UPDATE

“Le voci di mie dimissioni sono destituite di fondamento e non capisco come siano circolate [word of my resignation is without foundation and I don't understand why it is circulating]”, Silvio Berlusconi has stated to the Italian news agency Ansa.  Look at the bonds, Silvio.

Further UPDATE mid afternoon

Mediobanca (+5,82%)   Intesa Sanpaolo (+5,15%).   Fiat   (+5.12% ). Fiat Industrial  (+4,06%)
Spread German - Italian 10 year bonds below 470 (it was above 490 this morning)

Early evening UPDATE

Spread Italian German bonds back up to  487. Yield on Italian 10 year bonds back to  6.67%.  The yoyo effect of Berlusconi's exit timing is quite extraordinary.