Italian prime minister Silvio Berlusconi announced his resignation Tuesday after Italy’s ruling coalition lost its majority in the lower house. Although parliament voted to pass a key austerity budget bill demanded by the European Union, the government suffered a series of defections which made Berlusconi’s long-term position untenable. As the London Daily Telegraph reported:
More than half of the members of the Italian lower house refused to take part in the vote, laying bare Mr Berlusconi’s lack of support in parliament as financial pressure from the eurozone debt crisis continued to focus on Italy.
Opposition parties immediately demanded that Berlusconi step down to calm the bond markets, saying that having won just 308 votes in the 630 member lower house, he had no majority or a mandate to govern.
Mr. Berlusconi is expected to step down next week, with several leading Italian politicians vying to replace him, including his favored successor Angelino Alfano, and on the other side of the political spectrum, former EU commissioner Mario Monti. At the age of 75, it is highly unlikely that Berlusconi will stage a political comeback. He managed a record three terms in office, making him the country’s longest-serving prime minister.
Berlusconi will be remembered in the United States largely for his steadfast support for President George W. Bush over the war in Iraq, as well as the wider war on terrorism, during his second term in office, dispatching 3,000 Italian troops to the Middle East in 2003 in support of post-war coalition operations. Together with British Prime Minister Tony Blair and Spanish Prime Minister Jose Maria Aznar, he was a strong ally of Washington at a time when much of Europe turned its back on America, including France and Germany. He was accorded the honor of addressing a joint session of the United States Congress in 2006.
Ultimately, Berlusconi’s downfall was the product of mounting turmoil in Italy, following years, if not decades, of economic mismanagement. Italy faces a massive debt crisis, which if not dealt with swiftly and decisively, could lead to the collapse of Europe’s third largest economy. Italy currently ranks 36th out of 43 countries in Europe on economic freedom, behind former Communist nations such as Romania, Georgia, Latvia and Lithuania, and 86th in the world.
Close to half of Italy’s total domestic output is comprised of government spending, and the economy has suffered from chronic deficits, over-regulation, high taxes, and endemic corruption. On its current course, Italy is going down the same path as Greece, and Berlusconi’s successor will face a daunting challenge if he is restore the health of the Italian economy. Ultimately, Rome must aggressively cut spending and implement much-delayed regulatory reforms including far greater labour market flexibility. The Berlusconi era may be over, but Italy’s momentous financial and fiscal woes will likely continue for many years to come.