Following Milan Election Loss, Failed Berlusconi "Referendum" Sets Stage For Early Italy Elections

Following electoral upheavals in Portugal, Germany and Finland, it is time to add Italy to the list, after Silvio Berlusconi's center-right coalition appears to have lost the critical election in Italy's financial capital, Milan, which also happens to be the center of the Bunga Bunga man's business and media empire. And while the mayoral election is merely symbolic for now, its outcome has substantial consequences for Italian governance (and thus stability): "With most votes already counted, leftist Giuliano Pisapia was set to capture Milan city hall with some 55 percent of the vote against around 46 percent for outgoing center-right mayor Letizia Moratti. The local elections were seen as a referendum on the billionaire prime minister. "This is the first defeat for Berlusconi's center-right coalition since they came back to power, and it sends a clear signal of voters' disillusionment," said Maurizio Pessato of pollsters SWG. "These results make early elections more likely, possibly next year, and I don't see any chance of meaningful economic reforms being implemented by a lame duck government." As is by now known, while Spain has recently reentered the bond vigilante's scope after its bonds have continued to traded near record highs, Italy has so far been spared. That will change soon: "Italy is the only euro zone economy in which, taking account of inflation, citizens are poorer on average than they were 10 years ago. Berlusconi's government last month cut its growth forecast for this year to 1.1 percent from 1.3 percent and cut next year's outlook to 1.3 percent from 2.0 percent. S&P's lowered its credit outlook on Italy this month due to its weak growth and failure to adopt reforms, although worries of an immediate impact on the markets eased after the Treasury sold long-term bonds near the top of its target range Monday." Will this be the catalyst that is seen as "change" to the status quo by enough bond holders that Italy becomes that last peripheral European domino to fall?

Reuters has more on the latest political regime change:

With the southern port of Naples also set to fall to the opposition Italy of Values party, the result raised the prospect of national elections before the scheduled date of 2013.

"This is a very heavy defeat and the big loser is the premier," said Leonardo Boriani, editor of the Northern League party newspaper La Padania, which has sniped repeatedly at Berlusconi's PDL party in recent weeks.

With the government preparing to bring forward plans to slash the budget deficit by 40 billion euros ($57 billion) after ratings agency Standard and Poor's cut its outlook for Italy's A+ rating to "negative" from "stable," the stakes are high.

Italy has one of the most sluggish economies in Europe, more than a quarter of its young people are unemployed and government policy is constrained by the need to contain a debt mountain equivalent to some 120 percent of gross domestic product.

In a move seen widely as a signal that he believed defeat in Milan was likely, Berlusconi chose to travel to Romania on Monday but senior ministers have ruled out any change of course before national elections due in 2013.

"It's all the communists' fault"

After being punished for initially calling the vote a referendum on his popularity and policies, Berlusconi blanketed the airwaves with trademark tirades against his longtime enemies: the left and "communist" magistrates.

His last minute television blitz, to which opposition parties were not given the chance to reply, prompted complaints that he was abusing his domination of the media, and magistrates in Rome opened a formal investigation.

Economy Undersecretary Daniela Melchiorre, a former judge, resigned in protest after Berlusconi delivered a rant against Italian magistrates to a surprised U.S. President Barack Obama at the Group of Eight summit in Deauville, France, last week.

Unfortunately for Silvio, unlike Saudi emirs, the country does not have a surplus of crude which it can use to buy the love of its people. As for what happens to the PM once he loses his political immunity, in the aftermath of the DSK sexual backlash scandal, we can only imagine how said "communist magistrates" will respond to the dirt that will come to the fore as every woman he may have had a dalliance with decides to finally present their case in a more objective judicial setting.