On Wednesday, Prime Minister Enrico Letta and his government passed a vote of confidence with a large majority both in the Senate and in the Lower House. The resignation of ministers from the centre-right Peoples’ of Freedom Party (PDL) on 29 September upon the request of their leader Silvio Berlusconi prompted the confidence test, shaking the government coalition. Though the prime minister rejected the resignations, they sparked a political crisis paving the way for renewed instability.
The official reason for the resignations was the PDL’s opposition to any kind of tax upsurge, as they deemed a further 1 percent VAT (taking it to 22 percent) increase unbearable. But it’s no secret that Berlusconi asked “his” ministers to resign just a few days ahead of a Senate vote to ban him from holding any public office as a consequence of his tax-fraud conviction.
Strong economic reactions came at the national and European level. The Italian market’s initial response was harsh, as Italy’s yield spread increased by 22 basis points from 265 bp on 27 September to 287 bp on 1 October. However, as a split inside the PDL over support to the government became a reality, Milan’s Stock Exchange gained three percentage points. Both trade unions and the Italian employers’ federation expressed concern over the seemingly chronic political and economic instability, and Foreign Minister Emma Bonino declared that instability could hinder Italy's renewed impulse in foreign policy, not to mention its ability to administer the incoming Italian presidency of the EU, beginning in the second semester of 2014.
The European Union also supported Letta unanimously, from Angela Merkel to José Manuel Barroso to Martin Schulz. Indeed, since the very beginning of his mandate, Letta proved to be a real and committed European supporter. European Commission President Manuel Barroso, in an attempt to contain the crisis, called Berlusconi to express his concern and declared that a government crisis in Italy, the third largest economy in Europe, would jeopardise the stability of the whole EU. Angel Gurria, secretary general of the Organisation for Economic Co-operation and Development, added his voice and concern about how instability would be an obstacle to the recovery path that Italy is pursuing.
The outcome of the vote of confidence made Letta, and his government, much stronger than before. And perhaps it also made Berlusconi weaker than he has ever been, although Italians have learned to never believe that Berlusconi’s political career could be over. As I wrote in a previous post, Letta is young but experienced. Throughout the crisis he has proved to be a true leader. His speeches at the Senate and the Lower House were calm but powerful. Letta strongly rejected the phrase that journalists used to describe his government – “the government of postponement”. As a matter of fact, he highlighted the five months of his government's successes and outlined ten main points of action for Italy’s recovery: a renewed commitment toward the EU’s duties, starting from a series of meetings with the main European leaders; reform of the fiscal system, with a focus on the tax evasion; the reduction of labour costs; and a new industrial policy mainly based on SMEs and environment and technology. He also highlighted the need to tackle record-high youth unemployment (now at 40.1 percent) and reduce the costs of politics. He warned MPs that Italy "runs a risk, a fatal risk" depending on the choices they make, stated that Italy will comply with all European duties, and restated his wish to create the “United States of Europe”, if not out of a vision, at least out of necessity.
But the real news goes beyond Enrico Letta's success. While at the Senate, his party was counting the missing votes to obtain confidence from among the Five Star Movement’s dissidents and other Senators belonging to the Mixt group, convinced that the PDL senators would have followed their leader without question. But deputy prime minister and PDL secretary, Angelino Alfano, decided to oppose Berlusconi’s diktat and give the government his vote of confidence. This constituted the first dramatic turn of events. His decision was immediately followed by the official declaration of 25 PDL Senators who were willing to follow him and create a new parliamentary group. In half an hour, Letta's government went from collapse to a new, stronger majority.
At that point, a second turn of events apparently surprised everybody, from the PDL to the Democratic Party: Berlusconi officially announced that he and his party would have voted in favour of Letta’s government, and so he did. For the first time, Berlusconi realised that he was no longer surrounded by "yes men". And while for the first time Alfano showed signs of independent leadership, Berlusconi for the first time understood that his position as head of the party was in serious jeopardy and that opposing the government would result in the breakdown of the PDL.
So, much ado about nothing? No.
While perhaps the PDL will undergo an internal split, the government’s newfound strength leaves it free from interference and therefore free to pursue and implement its promises. This, of course, goes much deeper. No more excuses for the delay of domestic reforms. This government has a clear deadline: 2015. From now, it must address an enormous public debt, tackle unbearable youth unemployment, implement structural reforms, address tax evasion and corruption, boost growth, increase competitiveness, and attract foreign investments. These are things that need to be done at home, with the help and support of European member states and institutions, but the ownership and responsibility lay at the national level. The days to come will show if the government is truly no longer hostage to Berlusconi's personal tribulations. If so, no more excuses.
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