As Boehner Worked To Shut Down The U.S. Government, Berlusconi Made His Move In Italy

The reactionary clown on the right hasn't been sentenced to prison

I spent most of the summer holed up in an old house (built in the 1600s) outside of Montespertoli, southwest of Florence in the Chianti hills. Don't look for it on a map; it's not on many. People who say Tuscany is too crowded with tourists in the summer, aren't talking about where I was. There are virtually no tourists. Which is fine. On the rare occasions when I had the need to talk with anyone, I talked with Italians. And what we talked about-- aside from the incredible food in the region-- was the headlines: Silvio Berlusconi being "sentenced" almost every day.

While I was there, the court of last resort for the old crook said his conviction for tax fraud and his sentence (four years, already reduced to one) would stand. He won't be allowed to participate in electoral politics for the next six years. Unfortunately, the 76 year old Berlusconi will never see the inside of a prison. He'll probably be confined to his sumptuous palace in Rome (Palazzo Graziolo) with an ankle bracelet. More people in Italy are talking about whether or not the judges were prejudiced than about the proven corruption Bersulsconi exhibited in this specific case (or generally)-- especially on the right. Many rightists-- especially wealthy ones, who are virtually all tax cheats too-- see him as a martyr. At the time, I wrote that Berlusconi's PDL party (Freedom Party), which he owns and funds, is a major participant in the ruling center-right coalition, will be a force for instability now. The Democratic Party-- as vapid and cowardly as the American Democratic Party-- isn't even likely to end the coalition they have with Berlusconi's party! The Democrat's Prime Minister, Enrico Letta, wants to hold onto power too much to break the coalition with the fascists.

That force for instability thing happened over the weekend. Just as drunken, frightened John Boehner succumbed to Tea Party pressure to shut down the American government, convicted criminal Silvio Berlusconi decided to shut down the Italian government. Prime Minister Letta, whose government collapsed when Berlusconi withdrew his 5 right-wing ministers from the Cabinet, called it an "irresponsible act of folly” motivated “exclusively by his personal problems."

Following Mr Berlusconi’s conviction for tax fraud last June, the coalition has been buffeted about by the bizarre behaviour of the former prime minister who, on alternate days, has threatened to pull it down only to withdraw the threat next day.

Mr Berlusconi refuses to accept the terms of the Supreme Court’s ruling, namely a four year prison sentence-- which was reduced to one year-- and a ban from public office. The crisis has accelerated greatly in the last week following his calls for all his MPs to resign, followed by this call yesterday evening for the PDL ministers to resign their government posts.

In theory, Mr Berlusconi claims that he has withdrawn his ministers because a prime commitment in the agreed coalition programme was not respected at last Friday night’s cabinet meeting when the government did nothing to stop a 1 per cent rise in VAT. In practice, that cabinet meeting was held in crisis-mode, following a remarkable mid-week tirade by Mr Berlusconi who accused his centre-left coalition partners of having a “criminal ideology” and of plotting to “eliminate” him by judicial means.

Mr Letta, normally a cool customer, called this latest tirade a “humiliation,” not for him but rather for Italy. Mr Berlusconi’s attack came at the very moment Mr Letta was in New York, addressing the United Nations General Assembly and investors on Wall Street, trying to present a picture of a stable Italy headed for a 2014 of guaranteed economic growth.

...Inevitably, with the exception of the media that he himself owns, this morning’s Italian media comment is highly critical of Mr Berlusconi.

Italy’s financial daily, Il Sole 24 Ore, owned by the Confederation of Italian Industry, summed up the mood in a front page comment: “Rather than deal with serious issues (such as unemployment and the protection of savings), he calls on “his” party to give its all in order to deal with the judicial problems of one person (himself), someone who has defended himself at three levels of judgement and who refuses to accept the final verdict. In this way he places himself (bad) and Italy (worse) beyond the confines of the rule of law."

Sunday, Reuters took an in-depth look at what probably happens next. President Giorgio Napolitano does not want to dissolve Parliament and call another election so soon after the last one. But Berlusconi is already campaigning and demanding new elections. The Establishment parties-- squabbling among themselves-- haven't managed to get anything done and "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." Italians are furious... fed up.

"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 euro zone," said Nicholas Spiro, head of Spiro Sovereign Strategy.

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.

...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.

Italy's borrowing costs hit a three-month high at an auction of 10-year bonds on Friday, while the premium investors demand to hold Italian debt rather than German paper widened to about 267 basis points from under 250 at the start of the week.

Saccomanni's deputy Stefano Fassina warned on Sunday that benchmark bond yields would rise by up to 300 basis points if new elections were called.