Silvio Berlusconi

Silvio Berlusconi will meet Pier Luigi Bersani, the former Italian PM announced, in a sign that a door may be opening for the two mainstream parties to reach an agreement on the shape of the future Italian government. However, PD leader Bersani, while confirming the meeting, ruled out once again the idea of a PD-PdL grand-coalition government: in a letter to the Italian newspaper la Repubblica, Bersani said he remains in favour of a PD-led minority government, possibly allowing only for tacit support (i.e., abstention) from Silvio Berlusconi’s PdL.

Outgoing President Napolitano yesterday called for wide agreement to be reached among the main political parties for the sake of the country and its extremely difficult economic situation.

Italy announced officially on Mar 28 that it failed to form a coalition government. The remaining options for Italy include: 1) a dramatic agreement on formation of a coalition government between Pier Luigi Bersani’s Democratic Party and Silvio Berlusconi’s People of Liberty party; 2) appointment of a technocratic prime minister that receives support from both the Democratic Party and the People of Liberty party; and 3) a re-election. The first and second options are becoming less plausible with time.

Although Silvio Berlusconi expressed his intention to form a coalition with the Democratic Party, Bersani refused to do so with the People of Liberty party. Regarding the second option of appointing a technocratic prime minister, Berlusconi opposed the idea of a new technocratic government. The only remaining option is a re-election. According to Italy’s electoral law, a second general election must be held three to four months after presidential election results come out in May. A reelection is likely in Sep.

While the debate in the past few days has focused on the upcoming election of the next president (ballots to start on 18 April), many Italian political commentators argue that an agreement between Silvio Berlusconi’s centre-right PdL and centre-left PD on a presidential candidate may pave the way for a PD-PdL government to emerge. A Bersani- Silvio Berlusconi deal on a grand-coalition government is by no means a certain outcome, but the recent softening of tone between the two leaders and their meeting scheduled for some time this week suggest some agreement on the shape of the future government may emerge after the presidential election.

Italian FinMin optimistic on Italy’s exit from the excessive deficit procedure (EDP) in May, Vittorio Grilli said yesterday after meeting with the EU Commissioner Olli Rehn. With regard to the recent decision to repay a large part of commercial debt of the general government, Grilli said “there are no changes to the direction of fiscal austerity, the budget limits remain unchanged – namely the requirement of a structurally balanced government budget”. Grilli said public debt is likely to rise by 3pp of GDP by 2014 as a result of the arrears repayments.

EU Commissioner Rehn confirmed this morning that the Italian government’s decision to liquidate government arrears is supported by the EU Commission as it does not endanger a “sustainable correction of the budget”.