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Berlusconi's Government Nears Collapse as Allies Squabble
http://quote.bloomberg.com/apps/new...h8&refer=europe
July 10 (Bloomberg) -- Italian Prime Minister Silvio Berlusconi's government is nearing collapse as the fallout from his Nazi remark and disagreements over the draft budget provoke a rift among allies that brought him to power.
The Northern League party, which advocates more autonomy for Italy's regions in the industrial north, has renewed threats to leave Berlusconi's coalition, bringing the government down. Leader Umberto Bossi's decision to quit Berlusconi's first administration led to that government's fall in 1994.
``The situation has reached the boiling point, with no alternative but to call for early elections,'' Francesco Rutelli, leader of the Daisy party and Berlusconi's opponent in the 2001 elections, said late yesterday on state-owned RAI television. ``Italians expect answers on the economy and the government is only creating worries.''
Berlusconi's popularity has dipped as Italy's economy shrank in the first quarter and many voters haven't seen tax cuts promised in his 2001 campaign. His likening a German Social Democrat to a Nazi concentration camp officer on the second day Italy took over the European Union presidency irked Deputy Premier Gianfranco Fini, who has spent his political career trying to distance his National Alliance party from its Fascist roots.
The government lost ground in local elections in May. The loss of Rome's regional seat triggered a series of emergency meetings with members of House of Freedoms coalition to try to restitch the alliance. Fini said Bossi's comments referring to the capital as ``thieving Rome'' contributed to the defeat of Silvano Moffa, from Fini's own party, as head of the Rome provincial government.
Mini-Cabinet
Berlusconi's decision to place Fini in charge of a separate ``mini-cabinet'' setting economic and social policy raised concern among other allies. The promotion would clip the powers of Finance Minister Giulio Tremonti, who has close ties to the Northern League. The mini-cabinet's first scheduled meeting yesterday was boycotted by the Christian Democratic Union party, a smaller member of the coalition.
``The decision by UDC not to take part has stopped me from fulfilling the duty given to me by the prime minister,'' Fini said, according to the Ansa news agency. His spokesman confirmed the comments.
Berlusconi downplayed the allies' squabbles. On a visit to Italian filmmaker Franco Zeffirelli in Positano, the prime minister said he had decided to ``let the boys let out some steam,'' according to RAI.
The delay in a first draft of next year's budget, known as the DPEF, over how to approach pension reform has also heightened tensions within the coalition. The government plans to cut pension spending next year, the Corriere della Sera newspaper said citing a government document.
EU Presidency
Berlusconi won the biggest parliamentary majority since World War II when he was elected in 2001 on promises of tax cuts and creating 1.5 million jobs. His ruling coalition helped push through parliament an immunity law that suspended a corruption trial against the prime minister just in time for Italy to inherit the EU presidency from Greece on July 1.
Italy's presidency got off to a bad start with Berlusconi's outburst in the European Parliament, where he told German lawmaker Martin Schulz he'd be perfect for a screen role as a Nazi. Relations with Germany suffered a fresh blow this week when Stefano Stefani, a junior Italian minister and member of the Northern League, referred to German tourists as ``uniform and loud blonds that invade Italian beaches'' in a newsletter affiliated with Bossi's party.
Vacation Scrapped
German Chancellor Gerhard Schroeder yesterday announced he scrapped his vacation in Italy planned for next week.
Italian optimism about the government's handling of the EU presidency plunged after Berlusconi's gaffe, Corriere della Sera said in a poll on Monday. The EU president serves as the spokesman for the 15-nation bloc, shepherds legislation and runs summit meetings.
Fifty-one percent of Italians polled Friday said Italy probably would have a positive presidency, compared with 74 percent on June 12, according to the Ispo/Telesurvey poll published by Corriere.
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