Silvio Berlusconi fighting for his political life enters

Silvio Berlusconi fighting for his political life enters its final phase today with Italian Prime Minister using the European debt crisis as a shield.

"We could become targets of international speculators, such as Greece, Ireland and Portugal, a tragic risk with disastrous consequences," Berlusconi told supporters in Naples on 5 December. "The rating agencies have confirmed our assessment above, but have said the condition of political stability."

Rome lawmakers began debating a censure motion and the vote today, scheduled for tomorrow, will determine whether Italy's richest man may sustain his government, whose term has two years left. The yield premium on the debt to 10 years in Italy on comparable German bonds more than doubled this year, bringing the euro was the high of 212 basis points on November 30. Was at 157 basis points today from 9:45 am in Rome.

Berlusconi, speaking to the Senate today, said it would seek to expand its majority in parliament by forming a new government with the support of "all moderates", if he wins the vote of confidence. He called for a "covenant" that includes "the renewal of the program and composition of government."

Berlusconi's loss can lead to early elections or discussions to form a new coalition. prolonged political turmoil threatens to change the focus of investors to Italy, which has so far resisted the market downturn better than Spain, Portugal and Ireland, the maintenance of lower risk premium of the four. Standard & Poor's, in the reaffirmation of a credit rating of Italy + Nov. 2, said that political instability was one of the greatest threats to the country's creditworthiness.

Unclear future

"The greatest risk from the investor point of view is that we launched a new election and get a clear result in terms of a solid majority of work," said Vladimir Pillonca, economist at Societe Generale SA in London.

Under Italian law, elections are not automatic. If Berlusconi, 74, wins a parliamentary majority will become unstable after the defection in July, a key political ally, Gianfranco Fini, which led to the challenge of leadership. If you lose, President Giorgio Napolitano, will have to consult all parties to form a government, including a new one led by the head.

With a debt of more than 1.75 billion euros (2.3 trillion U.S. dollars), the largest in Europe in nominal terms, any credit rating downgrade or widening of bond has a greater effect in Italy than in other countries so-called peripheral .

A jump of 100 basis points in financing costs over the next two years would add 0.4 percentage points of gross domestic product for the budget deficit in 2011 and 2012, Pillonca estimated in a report of 09 December. That's almost twice the impact on the deficit of Spain, wrote. Italy needs to sell more than 220 million of bonds next year, most of the euro region.

Fini Break

The cost of insuring Italian debt against default rose almost 70 basis points to 204 from Fini, president of the Lower House of Parliament and co-founder of Berlusconi's governing Freedom Party broke with the prime minister made five months began to campaign for his ouster. Fini has the backing of at least 35 members of the Lower House of Parliament, enough to deny Berlusconi a majority.

Tensions between the two has deepened after Berlusconi admitted to calling the police to check into a nightclub dancer 17 years old, who was arrested for theft. The girl, who had attended parties at his mansion in Milan, was released in the custody of his former dental hygienist and now a local politician in his party.

In the vote approached, some lawmakers have abandoned efforts to end 16 years of Berlusconi's political career and pledged to back the prime minister.

Call for Research

The decisions that have led to Pier Luigi Bersani, head of the Democratic Party, and Antonio di Pietro, leader of the Italian Exchange, at the request of prosecutors to investigate the purchase of votes. Berlusconi denies the charge and predicts that it will take a vote of confidence.

"A week ago, just count the votes, a fall of government occurs as likely," said Matteo Regesta, fixed income strategist at BNP Paribas SA in London. "It is not the case today."

Before Berlusconi's entry into politics in 1994, Italy had an average of more than one government a year since the Second World War and investors have shown tolerance to changing political winds. Since the inception of the euro in 1999 until earlier this year, the risk premium in Italy over Germany an average of 35 basis points less than a quarter of the current level.

Extraordinary times

"We are living in extraordinary times in which past history is not very helpful," said Regesta. "In the past, coalitions with opposition strategies have had little impact in a market as huge and liquid as that of Italy. Given the tension that currently exists in the capital markets of the euro government and taking into account the players are giving greater attention to balance sheets, budgets, fiscal projections, "it can no longer be the case, he said.

One of the reasons for Berlusconi's political woes have not had more effect than all the parties agreed to approve the 2011 budget before the vote of confidence. The spending plan, which does not need the kind of salary cuts and tax increases implemented in Spain, Portugal, Ireland and Greece, aims to reduce the deficit to 3.9 percent of GDP next year from 5 percent this year. That compares with 6.4 percent in Spain in 2011, 4.9 percent in Portugal and 10.3 percent for Ireland.

Italy's finances a confidence vote on 10 December when the European Economic and Monetary Affairs, Olli Rehn, told lawmakers in Rome that the EU is expected that Italy needs more budget-cutting measures in 2011, although EU would be "carefully monitoring" the country's finances.