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Berlusconi Has Last Laugh As Italy Scrambles To Contain Fallout From Government Collapse

Tyler Durden's picture




 

Following yesterday's unexpected (if not shocking) news that ministers from Berlusconi's PDL have resigned en masse in order to push for new elections, leading to the latest Italian government crisis (in a long and distinguished series), Italy's premier Letta and president Napolitano are scrambling to preserve some stability, and not only they but moments ago Ansa reported that the management and supervisory boards of Italian megabank Intesa are set to meet at 6 pm, as not even the most optimistic see an easy way out of the political dead end Italy has found itself in now.

And while everyone's attention will be drawn to the financial markets' response, even as everyone knows another Italian - former Goldmanite and head of the Bank of Italy and current head of the ECB, Mario Draghi - has those under control (just think of all the "political capital"), the political situation is indeed very serious. So while the ECB will try to do "whatever it takes" to preserve stability, the math on the ground is far more problematic. According to a Corriere della Sera reports, citing its own calculations, PM Letta needs to find 24 votes to win a possible confidence vote in Senate next week, Letta can count on 137 senators without former premier Berlusconi’s party and its allies. He needs 161 votes to win in the 315-seat Senate as the upper house also has 6 senators for life. Should the confidence vote not pass, he will have no choice but to resign leading to the second Italian elections in seven months.

Which is why as Reuters further reports, Letta will meet the president on Sunday in a few minutes, at 6 pm local time, "to try to chart a way out of a deep political crisis after Silvio Berlusconi pulled his ministers out of the government and called for new elections."

President Giorgio Napolitano said he would only dissolve parliament as a last resort but just seven months after the last vote it is not clear if an alternative majority can be found.

 

Berlusconi, the centre-right former prime minister who was forced out of office in November 2011 at the height of the euro zone debt crisis and faces a ban from parliament for tax fraud, has already launched his election campaign.

 

Infighting among the left-right coalition government has thwarted efforts to push through reforms Italy needs to emerge from a two-year recession, a 2-trillion-euro public debt and youth unemployment of around 40 percent.

 

The political paralysis resulting from the government's collapse will delay those reforms even further in the euro zone's third largest but most sluggish economy.

 

"It is tradition for the president to dissolve parliament early when it isn't possible to create a majority and a government for the good of the country," Napolitano told reporters ahead of his meeting with Letta. The prime minister will address parliament on the crisis early next week.

This being the political circus that is Italy, only very naive europhiles will be surprised that from a coalition member, Berlusconi promptly became the reason for the government collapse in just over half a year.

Berlusconi said he decided on the shock move on Saturday after the government's failure to avert a long-programmed hike in sales tax at a cabinet meeting the day before. Letta dismissed the motivation as a "huge lie," saying instead that the media tycoon, who celebrated his 77th birthday on Sunday, was acting out of fury at his impending expulsion from parliament following a conviction for tax fraud. With fears that markets will punish Italy for the political turmoil, all eyes now are on whether Napolitano can muster backing either for a second Letta government or for an administration led by another figure.

 

If not, Italy would be forced to return to the polls with a major risk that, with a dysfunctional electoral law and three parties of roughly equal size, they would produce a hung parliament and yet more instability. Berlusconi on Sunday called for new elections, but there were signs that some allies may not be willing to follow him.

 

"The only path to follow is to go with determination towards new elections," Berlusconi told a party gathering in Naples in a telephone link-up. "I am convinced that a government of taxes is not in the interests of our country." 

 

Economy Minister Fabrizio Saccomanni played down the risk that Italy's borrowing costs would shoot up when markets open on Monday, a danger highlighted by other cabinet members. "I think the uncertainty connected to the government's instability has been largely already factored in during the last few weeks," he told business daily Il Sole 24 Ore.

Somehow that does not explain why Italian banks are rushing in a panic to prevent a bond collapse at all costs. But at least they have experience: recall that it was Berlusconi's intransigence once again that caused Italian bond yields to hit record highs in November 2011, when Draghi refused to buy Italian bonds until Berlusconi quits, which he did ultimately to prevent the collapse of Europe (even as he was contemplating Italy leaving the Eurozone).

It is only fitting that Bunga Bunga has the final laugh.

As for the punchline:

"Markets have grown accustomed to Italy's dysfunctional politics but there's a sense that things are now spinning out of control, with potentially dangerous consequences for both Italy and the eurozone," said Nicholas Spiro, head of Spiro Sovereign Strategy.

Of course, nobody could have possibly foreseen this happeneding in a world in which all critical structural political decisions are henceforth deferred to the local central bank, in hopes it will do all in its power to avoid domestic political dysfunction from tearing the system down.

So get to work Mr. Draghi, or else all that political capital invested in a "No Plan B" Europe may suddenly evaporate.

 

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Sun, 09/29/2013 - 12:24 | 4003449 Motorhead
Motorhead's picture

Va bene!

Enjoy your Sunday, bitchez!

Sun, 09/29/2013 - 12:25 | 4003452 DoChenRollingBearing
DoChenRollingBearing's picture

Grazie, amico!

Sun, 09/29/2013 - 12:40 | 4003492 bank guy in Brussels
bank guy in Brussels's picture

Cooking premium pasta tonight, to celebrate advance toward the inevitable departure of Italy and the other Southern countries from the euro

A toast to you Berlusconi ! Revenge is sweet, isn't it ?

Sun, 09/29/2013 - 12:47 | 4003507 DoChenRollingBearing
DoChenRollingBearing's picture

Enjoy dinner, sounds delicious!

They fuck Berlusconi, Berlusconi fucks them. Ha ha!

 

I know he isn't Sicilian, but the below does seem fitting:

"Revenge is a dish best served cold."

(and I think a surprise is pretty close to cold...)

Sun, 09/29/2013 - 13:00 | 4003536 Dareconomics
Dareconomics's picture

Italy has had 61 different governments since 1946 and is about to try for a 62nd.  While the financial press is attempting to whip everyone into a state of frenzy over the “crisis”, this situation is fairly typical of Italian politics.  Governments in Italy only last about 13 months on average, and this one is already six months old.  Usually Italy can get by without anyone ruling the country because the civil service is running the country.   This time is different because Italy requires its duly elected government to enact budgetary and economic reforms.

While political instability is not good news, the current situation is overhyped.  In a few days, there will be a deal, because there is always a deal.  In the meantime, European markets are in store for a bumpy ride.

 

http://dareconomics.wordpress.com/2013/09/28/around-the-globe-weekend-ed...

Sun, 09/29/2013 - 15:09 | 4003707 Freddie
Freddie's picture

Italy in some form has been around for 2,000 years.  They know politicians and taxes are a scam.  The unstable govts probably beat this fantasy that the United States has a real Constitution. 

Berlasconi is the good guy because the EU hates him.  The EU and banskters jacked up rates to get rid of him.  They came up with tax fraud, used in Italy and Germany, to go after enemies, pols, business owners and sports stars. 

If Italy gets the ***k out of the EU and Euro - I might try to emigrate.  At least you can live in a police state where the food is good as well as the climate. ObamaLand is total shit.  The USA turned to crap around the Civil War and got worse with FDR then the murder of JFK and LBJ's phony war.

Sun, 09/29/2013 - 17:14 | 4003951 DaddyO
DaddyO's picture

The pic of Berlusconi looks like he was just told he was going to have a happy ending, bunga, bunga.

DaddyO

Sun, 09/29/2013 - 21:49 | 4004491 Non Passaran
Non Passaran's picture

You can't know who will win the next election.
Hope it gets nasty.

Sun, 09/29/2013 - 12:54 | 4003514 Handful of Dust
Handful of Dust's picture

Maybe it will get so bad in Italy we actually start getting Italian immigrants again. That would be so cool!

Right now my neighborhood is so 'diverse' I get free Urdu, Parsi, Paki, Spanish and Arab lessons every dog-gone day. I'd love to try Italian for a change; it's definitely more romantic then Urdu.

...as for those Italian women...here's [one of many of] Berlusconi's gf:

 

http://www.7msport.com/news/upload_img/20110212/rd_o.jpg

 

Oh La la!

I hope they like bald Americans.

Sun, 09/29/2013 - 13:35 | 4003595 DoChenRollingBearing
DoChenRollingBearing's picture

Ah!  A (inadvertent?) linguist!  Tell me, what does "Quss sumak!" mean?

I keep hearing it on Al-Jezeera after all...

 

:p     :)

Sun, 09/29/2013 - 15:10 | 4003710 Freddie
Freddie's picture

+ 1 million lira

F the EU and F the Euro

Sun, 09/29/2013 - 12:53 | 4003525 VD
VD's picture

Vaffanculo!

Sun, 09/29/2013 - 13:29 | 4003589 Harbanger
Harbanger's picture

The original beaky buzzard with an Italian Accent.

http://www.youtube.com/watch?v=-UG2xVExfu8

Sun, 09/29/2013 - 12:23 | 4003451 DoChenRollingBearing
DoChenRollingBearing's picture

Berlusconi for US President!

Sun, 09/29/2013 - 13:48 | 4003614 Harbanger
Harbanger's picture

Even Super Mario the game character will do.  His brother Luigi can be VP.

Sun, 09/29/2013 - 14:00 | 4003631 FeralSerf
FeralSerf's picture

That would be a clear improvement over what we've got!

Sun, 09/29/2013 - 12:26 | 4003459 Pooper Popper
Pooper Popper's picture

I hope everyone is having a good day,in this SUCK-ASS world!

Sun, 09/29/2013 - 12:42 | 4003495 cossack55
cossack55's picture

Sho you right!!! As your title specifies, keep the popcorn flowing and the TP handy. A little football, a little societal collapse. You can't buy this kind of entertainment (not counting taxes).

Sun, 09/29/2013 - 12:35 | 4003463 Doyle Hargraves
Doyle Hargraves's picture

It should read:

"Markets have grown accustomed to the USA's dysfunctional politics but there's a sense that things are now spinning out of control, with potentially dangerous consequences for both the USA and the dollar," said Nicholas Spiro, head of Spiro Sovereign Strategy.

Sun, 09/29/2013 - 12:30 | 4003468 thismarketisrigged
thismarketisrigged's picture

quick, the markets open in less than 20 hours, must make some fucking bullshit up how everything is ok so all the markets can shootup green.

 

only got so much more time to do so. 

 

fucking bastards

Sun, 09/29/2013 - 21:47 | 4004481 Non Passaran
Non Passaran's picture

The recent series of awesome economic news from Euro-shitholes like Latvia seems to be designed to make that point.
A $20bn economy grew 6% or something. That will solve everything!

Sun, 09/29/2013 - 12:30 | 4003469 Seize Mars
Seize Mars's picture

No, Mr. Berlusconi, I think the "people" will have the Last Laugh.

http://bp3.blogger.com/_3wvT74x-2Us/SCyCCkGLr6I/AAAAAAAAAc8/k6WwVP7mU7s/...

Sun, 09/29/2013 - 12:34 | 4003470 carbonmutant
carbonmutant's picture

Beppe Grillo says, " It is highy likely Berlusconi was given promises that were later not kept"

Sun, 09/29/2013 - 14:05 | 4003640 carbonmutant
carbonmutant's picture

Beppe's threatening to pull out of the government too if Napolitano doesn't call for early elections.

http://www.repubblica.it/politica/2013/09/29/news/grillo_non_c_crisi_di_...

Sun, 09/29/2013 - 12:33 | 4003477 Joebloinvestor
Joebloinvestor's picture

Hey Mario, you just got BUNGAD!

Sun, 09/29/2013 - 12:45 | 4003499 Handful of Dust
Handful of Dust's picture

Datsa ma Boy!

Sun, 09/29/2013 - 12:45 | 4003501 shovelhead
shovelhead's picture

Is there any way we can have the whole Mediterranean area declared a problem child and ship it off to reform school?

Sun, 09/29/2013 - 12:53 | 4003522 DoChenRollingBearing
DoChenRollingBearing's picture

PLEASE take the following as well: Obama, Reid, McConnell, Schumer, Boehner, Pelosi, Feinstein, Grahamnesty, Bill Nelson --- aahh, my fingers grow tired...

Sun, 09/29/2013 - 12:47 | 4003505 ebworthen
ebworthen's picture

I will have a Bunga-Bunga party when Italy goes back to the Lira!

Die Euro!  Die!!!

Sun, 09/29/2013 - 13:07 | 4003547 max2205
max2205's picture

Swaps

Sun, 09/29/2013 - 13:19 | 4003570 W74
W74's picture

Why aren't these guys watching American Gridiron Football?  Italian government and possible bank failures in Italy? Please, the Bills game is the most important thing going on right now.

Sun, 09/29/2013 - 13:23 | 4003576 Bam_Man
Bam_Man's picture

The sooner they go back to the Lira, the better.

Cheaper holidays in bella Italia and better prices here (in US$) on the vino.

Sun, 09/29/2013 - 13:27 | 4003585 CPL
CPL's picture

That rascal has more political lives than a cat.

Sun, 09/29/2013 - 14:55 | 4003689 falak pema
falak pema's picture

nope he has more ill earned money than the proverbial cat; and Italy loves fat cats.

Sun, 09/29/2013 - 13:54 | 4003617 falak pema
falak pema's picture

There is only one thing constant in the italian scene :  it is that united is a notion that died when rome died; as united meant been under the roman gun. That marks you for 2 millenia! Italy has never been united truly except under papa-Musso lini.

Italy untied  into regional power structures is more like it then Italy united

And Berlu knows it. It'll take a new Kaiser, ghibeline invasion à la Mutti, to unite Italy under heel of EU.

As there is no Pope or church on the political front, the Kaiser of Europe has NO local opponent today; except that universal empire which is now going into shutdown. 

The Italian people like the Spaniards, Greeks and Portuguese know this. If you leave EU you are on your OWN against the OLigarchy gun. The world is now divided into Oligarchy aristocracy and faceless people; nation states look like have been runners in this marathon race. 

Unless the Olgarchy loses it big time...the next three years, as they say, should clear the air on that. 

Sun, 09/29/2013 - 17:11 | 4003947 CPL
CPL's picture

Well there's a new island/volcano forming for them to argue over just off the coast of Lazio.

http://www.centrometeoitaliano.it/vulcanetto-in-azione-a-largo-della-cos...

 

 

 

Sun, 09/29/2013 - 14:07 | 4003641 Bunga Bunga
Bunga Bunga's picture

WINNING!

Sun, 09/29/2013 - 14:21 | 4003659 Yen Cross
Yen Cross's picture

 All the(weak) euro longs are about to have their margins called.

Sun, 09/29/2013 - 15:24 | 4003683 TNTARG
TNTARG's picture

They're all broken. The US is broken.

Feeding the banksters while starving people.

Corrupt politicians. Corrupted MSM. Corrupted Science. Corrupted Education. System corrupted to the core.

No ethics, no honor, no codes. System failure.

No way this could end well.

We can only wait for a long, long agony (already into it).

Sun, 09/29/2013 - 15:50 | 4003781 NoWayJose
NoWayJose's picture

The choice in Italy is to throw out the current system now and try to save the country, or try to extend the bubble and throw out the current system after the collapse. Its Grillo time.

Sun, 09/29/2013 - 16:26 | 4003850 Village-idiot
Village-idiot's picture

Where's Grillo? Your country needs you!

We all need a good laugh right about now.

Sun, 09/29/2013 - 18:23 | 4004062 Son of Captain Nemo
Son of Captain Nemo's picture

This proves what many have been saying for quite some time that Berlusconi is the renegade that may lead the way in showing the rest of the EU out the back door.  I think Putin has a hand is making inroads with deals on energy which may be too attractive to turn down.

While Italy may not be the most significant player in the EU, it's big enough to get the changes underway that will lead to a ripple effect that could take Germany off the fence which is all that would be needed to ruin the Euro's party.

Now if we can just figure out a way to make Angela Merkel resign?...

Sun, 09/29/2013 - 20:20 | 4004296 Bazza McKenzie
Bazza McKenzie's picture

 "recall that it was Berlusconi's intransigence once again that caused Italian bond yields to hit record highs in November 2011, when Draghi refused to buy Italian bonds until Berlusconi quits".

Actually it ws Draghi's intransigence in refusing to fund Italy until Berlusconi quit, because the latter was seen as a threat to Brussels/Berlin/ECB policy, and potentially to the euro if he pulled Italy out.  Draghi was quite happy to fund Italy after Berlusconi resigned.  So the fault lies with the unelected politician in the ECB, not with the elected one in Italy.

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