Italy's Berlusconi hits back at EU demands

Tuesday 25 October 2011 11.31
Italy to present firm proposals to summit tomorrow, Prime Minister says
Italy to present firm proposals to summit tomorrow, Prime Minister says

Prime Minister Silvio Berlusconi hit back last night at European Union partners who have been pressing Italy for swift economic reforms, saying no country in the bloc was in a position to give lessons to others.

Berlusconi issued a statement saying Italy would present firm proposals at the next EU summit on Wednesday, but an extraordinary cabinet meeting to discuss fresh pension reforms ended with no decisions last night, government sources said.

His remarks followed demands from German Chancellor Angela Merkel and French President Nicolas Sarkozy at a news conference on Sunday for him to take action, which Italian media interpreted as humiliating for the 75-year-old prime minister.

"Nobody in the Union can appoint themselves administrators and speak in the name of elected governments and the peoples of Europe," Berlusconi said in the statement. "No one is in a position to be giving lessons to their partners."

He said Italy had taken steps to shore up its public finances and repeated that it would balance the budget by 2013. He said his government had clear positions on how to address the sovereign debt crisis and the crisis in the banking sector, "in particular the Franco-German" system.

Other EU leaders have become increasingly exasperated at the Berlusconi government's erratic response to the crisis, which could threaten the entire euro zone if Italy does not shore up its finances and regain the confidence of financial markets.

Italy, the euro zone's third largest economy, is now firmly at the centre of the debt crisis as alarm has grown at its stagnant economy and the sustainability of its €1.8 trillion debt pile.

Under pressure from its partners, Berlusconi's struggling centre-right government has announced a succession of reforms and budget balancing measures since August, when market pressure forced the European Central Bank to support Italian bonds by intervening in the market.

However, markets remain sceptical and Italian 10-year bond yields are now nearly 6%, close to levels reached when the ECB began buying bonds in August.

Berlusconi's statement contained no details of the proposals he said would be taken to Brussels, but he already faces opposition from his Northern League coalition partners on the key issue of pension reform.

Parliamentary group leader Marco Reguzzoni yesterday repeated that the League was firmly against pension reforms that include raising the retirement age to 67 from 65, a step urged by institutions including the Bank of Italy.

Berlusconi was holding talks with Northern League leaders late last night after a cabinet meeting ended with no agreement on pensions and other reforms, government sources said.

Changing the pension system presents a formidable challenge for a weakened government facing internal divisions and distracted by a variety of scandals involving Berlusconi and several other ministers. Under the current system, the basic pension age for men is 65, a level to which the women's pension age is being gradually increased.

Many Italians, however, have a form of length-of-service pension which allows them to retire earlier, based on the number of years they have paid contributions.

Economy Minister Giulio Tremonti has promised a package of reforms that would open up closed professions, cut red tape and raise revenue though steps such as privatisations and a new wealth tax, measures all aimed at boosting growth and righting the state's finances.

The package has been repeatedly delayed by deep differences between ministers, including Berlusconi and Tremonti.