Tue, Aug 02, 2011 - Page 7 News List

Italy, Tremonti under pressure

ON YOUR OWN:A newspaper described the Italian minister of economy as being surrounded by friends, ex-friends and adversaries watching him sink into quicksand

Reuters, ROME

Italy’s divided center-right government faces a testing week with Italian Minister of Economy Giulio Tremonti weakened by a graft scandal just as markets have turned on the eurozone’s third-largest economy.

Tremonti, the budget hardliner credited with keeping Italy’s huge public debt from sliding out of control, has looked more and more exposed, at odds with Italian Prime Minister Silvio Berlusconi and undermined by a corruption probe against a former aide.

As parliament prepares to break for the summer on Friday, the opposition has stepped up calls for the government to resign, urging Tremonti to explain his links with Marco Milanese, a former adviser under investigation over alleged bribery and influence-peddling.

“These are things — and I’m thinking of the relationship with Marco Milanese — which certainly have to be cleared up,” Gianfranco Fini, speaker of the lower house and a bitter adversary of Berlusconi, told Il Messagero daily on Sunday.

He said Tremonti’s position was “exclusively a problem for his own conscience.”

The growing uncertainty over Tremonti’s position has spread alarm on financial markets already panicked over the eurozone debt crisis, pushing Italy’s borrowing costs to record levels last week and triggering a sharp slide in bank shares.

Tremonti is not directly linked to the accusations against Milanese, but has admitted “mistakes” in paying 1,000 euros (US$1,438) in cash a week to rent an apartment from his former aide, an arrangement that awakened suspicions the cash payments were to avoid tax.

A sometimes prickly and abrasive figure openly disliked by other ministers and increasingly estranged from Berlusconi, he has denied doing anything illegal and has refused to step down, laughing off market rumors last week that he was about to quit.

However, his position has looked weaker than at any time since the government came to power in 2008 and Italian newspapers speculated at the weekend that he may be gone soon, replaced by an outside candidate such as Italian Treasury Director-General Vittorio Grilli or former European commissioner Mario Monti.

“Just about no one in the government or in the parliamentary party has made the slightest expression of public solidarity, starting of course with the prime minister,” business daily Il Sole 24 Ore said in a front-page editorial. “There is a crowd of friends, ex-friends and adversaries, standing around him, watching him sink into the quicksand.”

Berlusconi’s government, divided and struggling to recover from two heavy recent electoral losses, has faced questions from ratings agencies over its ability to pass the kind of reforms needed to revive Italy’s chronically sluggish economy.

Without growth, it will be impossible to cut the debt, and preliminary second quarter GDP data on Friday will be closely watched as worries have grown that even the meager 1.1 percent growth the government forecasts this year may not be achieved.

However, in Tremonti, who pushed a 48 billion euro austerity package through parliament this month to keep Rome on course to bring its budget into balance by 2014, Italy has at least had a finance chief trusted by markets with holding the budget line.

Despite having one of the eurozone’s heaviest debt burdens at 120 percent of GDP, Italy has largely stood on the sidelines of the crisis thanks to its relatively modest budget deficit and conservative financial system.

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