Silvio Berlusconi resigned as prime minister of Italy on Saturday after 17 years in power. The longest-serving post-war leader of Italy, Berlusconi — like George Papandreou, the former Primer Minister of Greece — has seen his recent years in office overwhelmed by the financial crisis. Italy’s $2.6 trillion debt is now 120 percent of its Gross Domestic Project and during the past 15 years (i.e., during most of Berlusconi’s time in office) the country’s economy has only grown 0.75 each year. On Wednesday, the yield on 10-year-old Italian government bonds surpassed 7 percent, the level at which Greece, Portugal, and Ireland had to seek bailouts from the European Union and the International Monetary Fund. Italy’s economy, the third largest in the EU, is believed to be too large to bail out.
Crowds Sing “Hallejuhah”
After losing a majority vote on Tuesday, Berlusconi said he would resign after both houses of Italy’s parliament passed austerity measures demanded by the European Union and meant to restore confidence to global markets. On Saturday, a day after the Senate had approved austerity measures, the lower house voted 380-26 with two abstentions to pass the measures, which have now been signed into law. The austerity package aims to provide 58.9 billion euros in savings through spending cuts and tax raises, in order to balance the budget by 2014. Under the austerity package, salaries for public sector workers will be frozen until 2014; measures to fight tax evasion will be strengthened; the retirement age for women will rise from 60 in 2014 to 65 in 2026, the same age as for men; the Value Added Tax will increase from 20 to 21 %.
A 75-year-old billionaire, Berlusconi has been the prime minister three times since he came to power in 1994 and has said that he has been the “best head of government” in Italy’s 150 years as a republic. But sex scandals — including charges of having sex with an under-age girl — and allegations of corruption and fraud in his vast business empire have clouded the last years of his premiership. Berlusconi’s name has also become irreversibly associated with so-called “bunga-bunga” parties which young women were allegedly paid to attend.
His premiership has indeed ended in ignominy. As Berlusconi entered the presidential palace, crowds jeered and yelled “buffoon” and “go, go thief.” Police were hard-pressed to keep the crowd — some singing the Hallelujah chorus from Handel’s Messiah — from booing him. Berlusconi left by a side-door and said that he felt “embittered” on hearing the hostile crowd.
Greece and Italy: Is Democracy Losing to Financial Markets?
President Giorgio Napolitano is expected to appoint technocrat and well-respected economist Mario Monti, a former European Commissioner, as his successor. However, there is widespread opposition to Monti — considered a choice foisted on Italy by the EU — and a feeling that a change of government is not enough to solve Italy’s economic problems. A team from the EU has now come to Rome to monitor Italy’s implementation of the austerity measures.
Many obstacles face Monti. Berlusconi’s center-right coalition is deeply divided, with many in favor of early elections:
The clash over Mr. Monti raised concerns across the political spectrum about the growing influence of financial markets in democracies. In Italy and elsewhere, a dysfunctional political class has been “impotent¯” in the face of market dynamics and their impact on people’s lives, the commentator Luigi La Spina wrote Saturday in the Turin daily newspaper La Stampa.
But the main opposition party and other lawmakers, fearing that elections would lead to an unsustainable period of market turmoil, support a transitional government.
A similar scenario has occurred in Greece, where the new prime minister, Lucas Papademos, is also a technocrat economist and a choice favored by the EU. Indeed, Papandreou was harshly censured by European leaders for calling a last-minute referendum on the austerity measures that the Greek Parliament had to pass in order to receive the next tranche of bailout funds from the IMF, the EU and the European Central bank.
Some have seen Papandreou’s aborted call for a referendum not as foolhardy but a chance to give Greeks a say in the fortunes of their country. But as has happened in Italy, democracy has been made to take a backseat to financial exigencies.
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