MercoPress. South Atlantic News Agency

Berlusconi stepping down; technocrat or national unity government to follow

The flamboyant PM is resigning “to save Italy and the Euro”

Italian Prime Minister Silvio Berlusconi said on Tuesday he would resign after suffering a humiliating setback in parliament that showed a party revolt had stripped him of a majority.

Berlusconi confirmed a statement from President Giorgio Napolitano that he would step down as soon as parliament passed urgent budget reforms demanded by European leaders after Italy was sucked into the epicentre of the Euro zone debt crisis.

The votes in both houses of parliament are likely this month and they would spell the end of a 17-year dominance of Italy by the flamboyant billionaire media magnate.

His failure to implement reforms fuelled a party revolt and Berlusconi told his own Canale 5 television station that the only option was an early election. However, this could prolong the uncertainty that has sapped market confidence.

Napolitano said he would now hold consultations on the formation of a new government. Markets and Napolitano himself are thought to favour a technocrat or national unity government.

Berlusconi's government won a key budget vote after the opposition abstained on Tuesday but failed to secure a majority, obtaining only 308 votes in the 630-seat lower house, eight short of the 316 needed to be sure of passing legislation.

Pier Luigi Bersani, the leader of the main opposition Democratic Party, said Italy ran a real risk of losing access to financial markets after political uncertainty pushed yields on government bonds towards a red line of 7%.

“I ask you, Mr Prime Minister, with all my strength, to finally take account of the situation ... and resign” Bersani said immediately after the vote.

Italy, considered too big to bail out, has replaced Greece as the main cause for concern in the Euro zone's sovereign debt crisis.