Italy: Government Saved, or Maybe Not

October 26th, 2011
in econ_news

berlusconi Econintersect:  The Italian government of Silvio Berlusconi (pictured) appears on the brink of collapse Wednesday morning (October 26).  The center-right collation government has been unable to resolve a deadlock over austerity measures demanded by the EU.  The key hang-up centered on proposed pension reforms which would raise the Italian retirement age to 67 (from 65).  On Tuesday afternoon CNN cited reports that the Italian government reached agreement and avoided a split over the issue.  By Tuesday evening, Al Jezeera reported that the pension issue was still open and the government in jeopardy.

Follow up:

From Al Jezeera:

Berlusconi has found little support within his own coalition. He faces resistance from his ally, the Northern League, a minority coalition party led by Umberto Bossi and without whose support his government would fall.

Bossi himself conceded that the government is at risk. "Let's say the situation is difficult, very dangerous. This is a dramatic moment,'' he told reporters in Rome.

The Northern League, a regional party with a constituency that includes many small business owners and
pensioners, has been firmly opposed to raising the pension age. Bossi has been under pressure from grassroots supporters disillusioned with Berlusconi.

Eurozone partners like Germany are critical of the opposition. Germany is raising its pension age to 67 and Angela Merkel, the chancellor, will have a hard time explaining to voters why Europe's largest economy should be ready to help countries whose workers retire earlier.

The entire episode in Italy is merely a side act to the EU situation where a finance ministers meeting scheduled for Wednesday was canceled because of lack of agreement on the details of the bailout plan which would aid Italy, along with Greece, Spain, and Portugal.

Sources:  CNN and Al Jazeera

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