Italy in the Hot Seat
Opposition Wants Berlusconi to Go in Return for Backing Reforms

As feared, the Greek decision to hold a referendum brought immediate pressure on Italy.

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Amiel Ungar,

Silivio Berlusconi
Silivio Berlusconi

Sometimes, but not always, corollaries work in politics. The European Union was desperate to reach a quick resolution on the Greek debt crisis in order to protect the larger European economies, particularly Italy,  from being sucked into the maelstrom. By that logic, if a deal was scuppered or delayed Italy would be in trouble. This is what has happened.

Yields on the Italian bonds rose by a further the percentage point on Tuesday. The gap between an Italian bond and a German bond redeemable after 10 years was 4.5 percentage points, the highest since the launch of the euro. Italy's short-term credit also took a pounding.

To head off a crisis, Italy is being pressed to adopt, in addition to austerity measures, a package of reforms that will be conducive to growth. The most important reform is to liberalize the labor market by weakening the power of guild associations and make it easier to fire employees. Both measures face considerable opposition from vested interests and unions.

Italian President Giorgio Napolitano, making a rare intervention, called upon the Berlusconi government to pass a reform package without delay and took the additional step of consulting with the opposition to ensure an umbrella for the reforms.

The opposition is willing to lend its support but at a price – the departure of Silvio Berlusconi. Berlusconi's opponent in the 2008 general elections, Walter Veltroni, warned, "every hour that this government remains in office...brings us closer to catastrophe."

At a summit of the opposition parties they declared their willingness to support unpopular choices on condition that Bersluconi steps back and allows the formation of a new executive headed by a personality who is above partisan politics.

The arrangement recalls 1992 (ironically on the eve of Italy's qualification for the euro), when following the massive scandals that brought down the postwar Italian system, a technical non-partisan government was chosen to steer Italy during the transition.

Berlusconi's majority is resisting this alternative and his coalition partners have said that they will not allow a government to be formed without Silvio Berlusconi as leader. So far they are effectively saying either the reforms will be led by the current government or Italy, like Greece, will go to the polls.

Pier Luigi Bersani, the main opposition leader, has called for a demonstration this Saturday that would unite "all those who have the future of our country at heart to jointly put in motion the Democratic, social and economic reconstruction of Italy."