Berlusconi fights for his political life as Italian deadlock raises fresh euro fears

Prospect of new elections in eurozone’s most indebted economy just one month after last poll

Silvio Berlusconi fears the formation of a government in which his party plays no part (AFP/Getty Images)

Italy was looking likely to become Europe’s next big problem last night as the eurozone’s most indebted economy wavered between another term of stop-gap government or a financially perilous return to the polls.

With the anti-establishment kingmaker Beppe Grillo failing to back the idea of a new caretaker premier appointed by the head of state, President Giorgio Napolitano, the prospect of a speedy resolution to the country’s month-long political stalemate is almost non-existent.

The crisis began when the centre-left coalition led by Pier Luigi Bersani failed to secure a majority in the senate in the February general election, despite winning a majority in the lower house. As a result Italy has limped along without an administration, and now looks like having to stage fresh elections.

Any return to the polls would increase uncertainty in financial markets already jittery following protracted negotiations over a bailout for Cyprus.

Vincenzo Scarpetta, Italy analyst for the Open Europe think-tank, said: “There’s no doubt new elections would be the worst of all worlds. With no one able to dissolve parliament until a new president is appointed in May, there couldn’t be a general election before the autumn. This would bring huge uncertainty to the markets.”

The prospect of another technocratic government would be a more favourable option, said Loredana Federico, a UniCredit research economist. “So long as Italy does not undo any significant part of the Monti reforms, markets should remain relatively stable,” he added.

Silvio Berlusconi, the former premier and head of the centre-right coalition, railed yesterday against the notion of another technocrat government, saying he wanted either a deal with Mr Bersani or fresh elections.

It’s no secret that the media mogul dreads the formation of a government in which his PDL (People of Freedom) party plays little or no part, for the simple reason that a head of steam is growing among Mr Berlusconi’s opponents for him to be expelled from parliament under a decades-old law that bars businessmen who have benefited from state subsidies from sitting in either chamber.

The news magazine MicroMega has collected a quarter of a million signatures calling for Mr Berlusconi to be expelled from parliament. The editor, Paolo Flores d’Arcais, said: “The key to making Italy governable again is the permanent ostracism of Silvio Berlusconi.”

Most observers say that without parliamentary protection, the mogul, currently involved in three criminal cases, would be left fatally exposed.

Justin Frosini, a constitutional law expert at Bologna University, said: “Berlusconi is more than just nervous; he knows that if his opponents – the centre-left and Grillo’s party – unite under a caretaker premier, he will be powerless and could well be kicked out of parliament.” If new elections were held, Mr Berlusconi could stage an unlikely comeback after an opinion poll from SWG Institute revealed that his popularity has risen since February.

The survey showed Mr Berlusconi’s coalition leading with 32.5 per cent compared with 29.6 per cent for Mr Bersani’s bloc and 24.8 per cent for Mr Grillo.

“Grillo has now come to a fork in the road. He can either support a technocrat premier chosen by Napolitano – or send Italy back to the polls and take the blame for the failure to form a government,” said Dr Frosini.

But in the medium- to long-term, some observers said it was hard to see a way past the dysfunctional state in which Italian politics found itself.

James Walston, a veteran Italian political pundit at the American University of Rome, said there had been political crises in Italy before. “But nothing like this, and there appears to be no way out of it,” he said.