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Italy On The Ropes Again After Secret Berlusconi Promise To Step Down In Exchange For Compromise Achieves Nothing

Tyler Durden's picture


Over the past few days, Italy has promptly re-emerged as a main cog in the illusion that Europe is a well-greased machine (yes, we know, funny) after it became clear that the country continues to refuse to implement any actual austerity measures following the requirement to do just that months ago when it got access to the ECB's sterlizied bond monetization scheme. In fact it got so bad that yesterday the entire Italian government was rumored to be on the verge of collapse as it was once again unable to reach a resolution on what the EU demands are prompt actions taken to raise pension and/or retirement age. According to the Telegraph, Italy may have found a compromise, one which actually ends the regime of Berlusconi... but not yet. Telegraph reports that Silvio Berlusconi has reportedly drawn up a "secret pact" under which he will resign in December or January, paving the way for Italy to elect a new government in March. "The embattled prime minister made the deal with his key coalition ally, Umberto Bossi of the devolutionist Northern League, in return for Mr Bossi's support for pension reforms, according to unconfirmed reports in two Italian newspapers – La Repubblica and La Stampa. Italy is under huge pressure from the European Union to reform its pensions system and extend retirement ages as part of a plan to rein in its enormous public debt and revive its moribund economy." "Don't make a fool of me in Brussels, and I promise that we'll go to elections in March," Mr Berlusconi told the Northern League leader, according to La Repubblica." This would all be great, if only for one small snag: the "plan", like everything else in Europe, is worthless. The FT reports that the compromise agreement "lacks specifics and risks falling short of what eurozone leaders have demanded ahead of Wednesday’s summit in Brussels....In the end, Umberto Bossi, the fiercely eurosceptic leader of the federalist League, made minor concessions that would raise the general retirement age to 67 years by 2026, but rejected changes to Italy’s length of service pension system that allows many workers to retire at the age of 61 with 35 years of contributions. Even Mr Bossi did not sound hopeful that the proposals would go down well in Brussels. In the past he has said he “doesn’t give a damn” about pressure from Europe over Italy’s pension system." He may change his tune once BTPs drop under 90 and go bidless.

In the meantime, the political atmosphere in Italy is about to go from bad to worse:

he has always batted away demands for his resignation and has repeatedly insisted that he will continue governing Italy until the end of his five year term in 2013.


Reports that his resolve may be crumbling, whilst not confirmed, will only add to the febrile political atmosphere as Italy struggles to convince the euro zone that it is up to the task of shoring up its economy and tackling its debt.


Mr Berlusconi has spent an intense two days hammering out a "letter of intent" to the EU on what Italy will do to reform the stagnant economy. Its public debt of 1.8 trillion euros is equal to nearly 120 per cent of GDP.


Mr Bossi said on Tuesday night that the coalition had reached agreement on reforms but that it was up to the EU to decide if they were enough. "In the end we have found a way. Now we will see what the EU says."


But he expressed doubt over whether the government would survive until 2013.

Unfortunately for Italy, unlike Europe, it does not have the luxury of delaying until eternity. From the FT:

Italy’s ability to service its €1,900bn public debt is dependant on continued support from the European Central Bank. The ECB, which began buying Italian bonds in early August to keep interest rates sustainable, set out a list of growth-promoting reforms that it urged Mr Berlusconi to put into legislation by September 30.

That deadline has long passed and, according to media reports, the 15-page document in Mr Berlusconi’s hands contains no timetable for implementation of what appears to be a list of commitments that falls short of those demanded by the ECB and the EU.

Corrado Passera, chief executive of Intesa Sanpaolo, a leading bank, said he was “disappointed” at the outcome. “In the situation we are in, I expected an economic programme that would be agreed by everyone and not just unconfirmed suggestions to take to Europe,” he told reporters.

A front-page commentary in Italy’s main business paper, Il Sole 24 Ore, which has previously urged Mr Berlusconi to resign, said it was “humiliating” to see how a “sketch on pensions” could be thrown together in 24 hours with the sole objective of placating Europe but with such weak content because of resistance from the Northern League.

Never a dull day in Europe.


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Wed, 10/26/2011 - 08:03 | 1811695 achmachat
achmachat's picture

so who gets the film rights for this story?

Wed, 10/26/2011 - 08:11 | 1811715 doomz78
doomz78's picture

This is what happens when you are screwed.  You do stupid things. 

Wed, 10/26/2011 - 08:04 | 1811700 gojam
gojam's picture

He's beyond parody

Wed, 10/26/2011 - 09:21 | 1811964 knukles
knukles's picture

Tee heh... Note the phrase that the Italian Parliament "was once again unable to reach a resolution on what the EU demands are".

Well now theres a right bloody great excuse to do fuck all noting  ... I mean if them bloody Krauts and Froggies'd tell us what they want then maybe we could do something about it, right?

And it's all gonna work out just bloody well right.

Wed, 10/26/2011 - 08:05 | 1811704 The Fonz...befo...
The Fonz...before shark jump's picture

Greece isn't even sorted and here we are focusing on Italy...he will not resign because as soon as does, he is open to arrest

Wed, 10/26/2011 - 08:20 | 1811741 Al Gorerhythm
Al Gorerhythm's picture

The exposure (Iceland, followed by Ireland-Greece- Italy-Spain-France Britain, etc, is a domino effect too. The actual debt unwind is yet to be felt. There is no guarantee that a domino effect will be played out in that arena though.

Wed, 10/26/2011 - 08:06 | 1811705 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

... and people think that Western countries have democracies. Bulls**t. We all live in covert dictatorships. Prime ministers and presidents are nothing but puppet representives of inbred 'elite' families.

Wed, 10/26/2011 - 08:06 | 1811706 bnbdnb
bnbdnb's picture

My God, these people are a mess.

Wed, 10/26/2011 - 08:06 | 1811707 ZeroPoint
ZeroPoint's picture

He "doesn't give a damn". Isn't that the story of this graceless age we live in.

Wed, 10/26/2011 - 08:07 | 1811709 Irish66
Irish66's picture

Key word today voluntary verses involuntary

Wed, 10/26/2011 - 08:24 | 1811756 lapedochild
lapedochild's picture

Agree and I read on BB that 50% is now voluntary what a BS!

Wed, 10/26/2011 - 08:07 | 1811710 HD
HD's picture

He didn't agree to step down - he's on double secret probation...

Wed, 10/26/2011 - 08:07 | 1811711 GeneMarchbanks
GeneMarchbanks's picture

Those Italians are such rebels. That is, until ECB withdraws buying their debt for a couple hours just to make a point.

By the balls, they've got you.

Wed, 10/26/2011 - 08:37 | 1811785 nonclaim
nonclaim's picture

Remember Italy also cooked the books to get into the Euro, but not as much as Greece.

It was good in the beginning but then the whole thing turned into a bad Opera and Italians in general will be happy to see it end, including the Berlusconi era.

Wed, 10/26/2011 - 08:15 | 1811725 AngryGerman
AngryGerman's picture

Italy will be the end of the Euro

at least the spaghettis are good for something

Wed, 10/26/2011 - 08:23 | 1811752 Maxwell Smart
Maxwell Smart's picture

Well said. If we can get rid of the euro and the EU with just paying, so let's pay.


Wed, 10/26/2011 - 09:05 | 1811914 irishlink
irishlink's picture

I totally argree. The Italians have hated the Euro from day one. All that lovely lira that was hidden from the tax man had to come out from under the covers. People bought stuff that they did not need or want, Prices went up as stores started to show their real returns. When I was in Italy a few years ago, thats what I heard everywhere, The euro drove the prices up I also believe the Italians will not react well to the cut backs, pension reforms etc. What a sad ,miserable mess.

Wed, 10/26/2011 - 08:17 | 1811732 Quintus
Quintus's picture

Let's be honest here.  If Italy sent their budget plans in the form of a used napkin with Bunga-Bunga related stains on it and the words "We promise to be very, very good in future.  Now can we have the money please?" scrawled on the back of it in red lipstick that would be enough.

There is simply no way in hell the Euro-clowns will blow up their grand scheme today just because they are not happy with Berlusconi's promises.

Greece keeps getting money despite totally and utterly failing to do anything they are tasked with, because they have the Eurosystem over a barrel.  So does Italy.

All of this is mere posturing to look 'Strong' and 'Responsible' to the creditor countries' voters.

Wed, 10/26/2011 - 08:17 | 1811734 slaughterer
slaughterer's picture

We just saw elections in Italy will not take out Berlusconi: Berlusconi pays too well for his votes.   If there is one loose cannon needing defusing at today's Euro-Summit, it is Bunga Bunga however.     

Wed, 10/26/2011 - 08:20 | 1811742 moonstears
moonstears's picture

This is a sad tale of the end of Sovereignty, without a shot fired in rebellion. See M. Redshield's comments on currency.

Wed, 10/26/2011 - 08:20 | 1811743 milanitaly
milanitaly's picture

EU will say "fantastic" everything Silvio tell today.

They have no other chance to avoid disaster.

And Silvio will go on to do nothing in the future.

We will not follow the EU's diktat like Greece to become more poors even before default.

Wed, 10/26/2011 - 08:21 | 1811748 luigi
luigi's picture

He won't resign.

You'll have to make use of riot police with tear gas to dislodge him from office, and a jemmy to lever him out of the chair...

60 millions Italian sheeple taken as human shields by a desperate Al Capone wannabee...

Wed, 10/26/2011 - 08:24 | 1811753 Börjesson
Börjesson's picture

Under the circumstances, it was fairly clever of Signor Berlusconi to get a double allotment of Italians onto the ECB board...

Wed, 10/26/2011 - 08:28 | 1811773 luigi
luigi's picture

You haven't heard Mr. Draghi statements today! Silvio could think: with friends like these, who needs enemies? :) And the other Italian is the one whou would not step down after the agreement Sarkozy-Berlusconi was settled which paved the way for Draghi at ECB... 

Wed, 10/26/2011 - 09:42 | 1812069 Börjesson
Börjesson's picture

Do you really think those two will screw over Italy just to get at Berlusconi? I'm sure they don't like him very much, but still...

Wed, 10/26/2011 - 10:31 | 1812344 luigi
luigi's picture

Not the least: I simply understood from your earlier post (maybe wrongly from my side) that you thought Berlusconi having made a clever move by having 2 Italians in keypoints of the ECB. I merely pointed out that those two aren't "his" men... And yes, I do think that they wouldn't think twice to be even more severe toward Italy than toward other Countries, bit not to just get a BErlusconi, but for a couple of good reasons.

1) Draghi and Bini Smaghi must defend and demonstrate that they are independent and have their Italian origin clinged to them like a mark of infamy they have to get rid of.

2) Draghi and Bini Smaghi do actually think that Italy deserves a "purge", needs to grow up and be responsible of its own actions (which I concur upon) and are of the sort of people who would throw the own son in cold deep water yelling "learn to swim or die trying"

3) don't sure about Bini Smaghi, but quite probably Draghi takes orders almost directly from God (or those who make his job), and this is maybe the most important of all reasons.

Wed, 10/26/2011 - 11:01 | 1812542 Börjesson
Börjesson's picture

Thanks for that clarification! Guess Silvio wasn't so clever after all.

Wed, 10/26/2011 - 08:25 | 1811759 slaughterer
slaughterer's picture

You really think Merkel, so firm on the structure of the agreement, will let Berlusconi pass with a condescending smirk when he lies glibly about austerity measures?  I do not think so.   Say hello to Euro-Summit 3.0 in Cannes my friends!  

Wed, 10/26/2011 - 08:25 | 1811761 lapedochild
lapedochild's picture

"He may change his tune once BTPs drop under 90 and go bidless"


Unlikely since Draghi has already stated that he will continue buying bonds, despite Germany's opposition

Wed, 10/26/2011 - 08:26 | 1811762 Peter K
Peter K's picture

My disappointment with Sivio is that he became soft on Euroland after the last election. He was angling to be loved, and become the president after 2013.

The real problem with Italy is the mis pricing of risk over the life of the Euro has allowed Italy to run up a 1.9t Euro debt. The risk is that when the interest rates fully normalize, they will be closer to 12% than 6%. At the same time, real GDP has declined during this same period. And this is the legacy of this last failed European experiment.

Wed, 10/26/2011 - 08:29 | 1811776 Scalaris
Scalaris's picture



Very pleased to see how the political clusterf*ck regarding Europe's financial malaise has been upgraded to a FUCKING TELENOVELA.


*takes pills*



Wed, 10/26/2011 - 09:45 | 1812081 falak pema
falak pema's picture

wait wait, the show is coming to London town, then Broadway!

Wed, 10/26/2011 - 08:36 | 1811789 mayhem_korner
mayhem_korner's picture



Old Mother Berlusconi went to the ECB cupboard, to fetch his insolvent nation a bone,

But when he bent over, Merkel took over and....(fill in the rest)

Wed, 10/26/2011 - 08:44 | 1811819 lizzy36
lizzy36's picture

Day of Days just beginning in Europe.

Last time it began on small airstrips, in the UK with thousands of C-47's and 60K of young brave men.

This time it is beginning with men like Berlusconi. Seems an apt commentary on the times.

Wed, 10/26/2011 - 08:49 | 1811832 xcehn
xcehn's picture

Get rid of all the puppet politicians.  Let the people decide directly what to do with their problems. Whatever they come up with will be better than the fate that awaits them from their elected bankster proxies.  The European Bankster Bailout Summit is the disgraceful and disgusting result of a total absence of real democracy.  The banksters and euroland couldn't swim, so they must drown.

Wed, 10/26/2011 - 08:49 | 1811834 lizzy36
lizzy36's picture

Well this is going well.

According to the Telegraph they are "brawling" in italian parliament:

Tensions over the tough economic reform programme have proved a little too much for a pair of Italian deputies, who just started a brawl in parliament.

Two deputies from the Northern League, a member of the ruling centre-right coalition, fought with members from the opposition FLI party of speaker Gianfranco Fini, grabbing each other by the throat as other parliamentarians rushed to separate them.

The sitting was suspended for a while after the fight, which broke out because of sarcastic remarks on television by Fini alleging that the wife of League leader Umberto Bossi had retired at 39.


It was only last year tempers flared in the lower house of parliament in Rome with one MP calling an opponent "a piece of ----" before several ended up wih black eyes. 

Wed, 10/26/2011 - 09:42 | 1812071 falak pema
falak pema's picture

soon they'll be brawling in all western parliaments, the way to go, when you are a paid, frustrated shill, like being in Putin's Russia today. Its the Zeitgeist of politcal action. Rome burns and the Oligarchs go thumbs up thumbs down, singing the people drown n we're the lucky clowns.

Wed, 10/26/2011 - 08:51 | 1811842 Miss Expectations
Miss Expectations's picture

Didn't Italy get kind of screwed when it joined the EU it tems of the valuation/exchange of the lira to the euro?  Didn't the low valuation of the lira allow the Germans to get Italian waterfront property for more than 50% off...explaining the horrible land development along the coast in Lecce?  Am I alone in enjoying watching Silvio jerk these extortionists around?

Wed, 10/26/2011 - 08:58 | 1811875 lizzy36
lizzy36's picture


Watching these Politicians, EU intellectuals, and members of the elite, jerk each other off, is my favorite reality TV.

Wed, 10/26/2011 - 12:30 | 1813013 Canuckistan Al
Canuckistan Al's picture

Bread and circuses...this is the circus part of that............... Would make for much more interesting TV than the crap they feed us in North America. A good dust up in parilment on live PPV...maybe a revenue opportunity.

Today's match features welterweight Merkel vs lightweight Sarkozy, in a no holds barred death match in the octagon................. $39.99 Fiatscos

Wed, 10/26/2011 - 09:39 | 1812051 falak pema
falak pema's picture

Tancrede of Lecce is a german real estate shill??? What a come down !

Wed, 10/26/2011 - 09:05 | 1811915 Kinskian
Kinskian's picture



The ones who don't enjoy themselves, even when they laugh. Oh yeah.

The ones who worship the corporate image, not knowing that they work for someone else. Oh yeah.

The ones who should have been shot in the cradle... Pow! Oh yeah.

The ones who say "Follow me to success, but kill me if I fail... so to speak." Oh yeah....

The ones who say "Be calm, calm."    ...Oh yeah.

Pasqualino Settebellezze

Wed, 10/26/2011 - 09:10 | 1811926 Odin
Odin's picture

Time for the ECB to make them an offer they can't refuse...

Wed, 10/26/2011 - 09:17 | 1811948 Use of Weapons
Wed, 10/26/2011 - 09:19 | 1811958 larynx
larynx's picture

I would really want to know what Silvio is wispering into Nicolas ear?

For sure Angela is amused.



Wed, 10/26/2011 - 09:23 | 1811980 falak pema
falak pema's picture

two dominoes down as the race to bottom continues...


Wed, 10/26/2011 - 09:42 | 1812065 supermaxedout
supermaxedout's picture

The US is very busy fighting Berlusconi who was once their pet. But not anymore. Berlusconie is flying to Putin with escorts to party in Russia. At least that is what the western media is saying is the purpose. To be a friend with Putin literally arm in arm is not what the US likes.

And Berlusconi was a friend of Gaddafi too. No doubt. Italy under Berlusconi was the only European country to ask for forgiveness for the crimes it committed in the colonian times in Africa including Lybia which was an Italian colony. This was the prerequisite for doing business with Gaddafi. Afterwards Gaddafi was very helpful to Berlusconi. Investing a lot in Italia. Italian companies had preferential status in Lybia. Businesss started to boom in the Mediterrean with Lybia and Italia as locomotives. China was invited too. Had more than 30.000 people in Lybia lots of projects running. The harbour in Naples was booming. Economically things were on the right track.

The mediterrean area as a whole could have really boomed. But this is not what is wanted in Washington and London. The mediterrean sea is the sea of the US and UK. Having in each country military bases. Now also in Lybia again. Only Syria is left. There will never be a real prosperous Italy as long as the US and the UK do not give up their iron control of the mediterrean.

Thats the way it is. And one should think a bit why is Berlusconi still in power. Because he gets so much assistance from outside for example from the US. For sure not. It is because he is one of the few Italian politicians not in the pocket of the US. Thats why the Italians stick to him. They do not want to continue to be an American puppet. They are fed up. Its that simple.

Berluscuni is Italian, is Mafia, is Catholic, is a macho, is a good singer and entertainer  but he is not an American and he and most Italians do not like to be dominated by the Americans further in the future.



Wed, 10/26/2011 - 11:03 | 1812557 luigi
luigi's picture

There are particles of truth in what you're saying, but don't forget Berlusconi is above all an opportunist.

He spent much of his time belly up and tail weawing on the white house's doormat and still today he keeps more than 3.000 soldiers in A-stan and committed in the effort to "liberate" Lybia (in order to pet the Boss hoping for forgiveness).

It is a desgrace but it is incidentally true, that for a distraction of the fate, the action taken by this ferocious clown in pure selfish greedy self interest to save himself coincide by pure casuality with moves putting Italy a step aside of the chor singing somewhat differently, as if it truly would like to reaffirm an independent role on the international scene, but it is just an illusion. I too would like Italy to be able to run an own agenda, but alas, it's only running the poor man's Al Capones agenda by now.

Wed, 10/26/2011 - 11:52 | 1812820 supermaxedout
supermaxedout's picture

Of course Berlusconi is extremely opportunistic. But this is the thing all politicians at the top have in common.

As you say Italy can not run its own agenda. The same is true for all other countries in Europe. But I think this is the good thing in the sea of bad news. Its becoming obvious that only a democratic united Europe has the power to push,  lets say an Italian agenda today. And tomorrow Europe is acting on something what is more on behalf of Germany or the Netherlands.

My dream is, that the European parliament in Strasbourg is forming one day the base for a true European government.  Not Brussels which is for me more synonymous for Nato and European buerocrats.

That would be then really a Happy End for Europe, which we really deserve after all the hardship in the past.

Wed, 10/26/2011 - 12:17 | 1812957 luigi
luigi's picture

I Quote.

Wed, 10/26/2011 - 13:06 | 1813141 onedb1
onedb1's picture

Not sure what the US has to be so smug about vs the EU . California is a joke of a state and the overall US debt makes the EU one look small. Do they even have decent motorways ? Ever been to Detroit , Baltimore, most of LA ,anywhere out of Manhattan ? The trigger for all this mess comes from the US/UK based banking/subprime social experiment,  certainly not Greek or Italian and the French and German cravings of being in power in Europe. Laughable.

Glad to see that despite having civilised western countries when most were still savages from the Roman Emprie to the Renaissance , some posters enjoy using the usual stereotypes of " spaghettis , grease , Al Capone etc etc . Enjoy the squallor of your beliefs. Despite the lack of unity, Italy is still there. Imagine what will happen once normal business is resumed..

Wed, 10/26/2011 - 13:17 | 1813181 ricocyb13
ricocyb13's picture

how can a guy like Mario Draghi, who fucked up Italy, can become the head of the ECB ?

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