Italy cabinet in emergency session over reforms

City A.M. Reporter
Italian prime minister Silvio Berlusconi called an emergency cabinet meeting to accelerate budget reforms in an attempt to calm market turmoil that threatens to tip Italy's economy into full-blown crisis.

Berlusconi is under growing pressure to step down and hand power to an emergency government of national unity. He held four hours of meetings with senior officials and ministers in the morning ahead of a cabinet meeting today.

The cabinet will consider various legislative options to fast-track reforms, including a decree and amendments to budget legislation already in the Senate, infrastructure minister Altero Matteoli told Reuters.

Berlusconi wants something concrete to show when he goes to the G20 meeting of economic powers in France on Thursday. Italian bonds have been targeted on financial markets as the Eurozone financial crisis spreads out from Greece.

Yields on 10-year Italian BTP bonds have fallen slightly from the highs reached on Tuesday but were still at more than 6.2 per cent, even with support from the European Central Bank's bond-buying operation.

Greece's surprise decision to call a referendum on austerity measures demanded by the European Union has worsened fears about the stability of other heavily indebted economies like Italy, the Eurozone's third largest economy.

As market turbulence spread, threatening a wider Eurozone meltdown, the scandal-plagued Berlusconi has come under fire from all sides over his handling of the crisis and his failure to pass decisive reforms.

President Giorgio Napolitano, in a highly unusual statement late on Tuesday, called on Berlusconi to pass long-promised measures without delay. Napolitano indicated he was looking at how much support there was for reform outside the ranks of the centre-right government.

Napolitano cannot dismiss Berlusconi as long as he has a majority. But if divisions in the coalition deepen and provoke a parliamentary crisis in which the government lose a confidence vote, he would have the power to name a new administration.

"That was a warning," said Anna Chimenti, a professor of constitutional law at the University of Foggia. "Until there is a crisis, Napolitano is like a referee who blows the whistle when rules are not respected. He's blowing the whistle now."