Former Italian Premier Silvio Berlusconi's political ambitions got a huge yawn on Thursday from both the bond markets and his fellow European conservatives, who instead heaped praise on the country's current leader.
Former Italian Premier Silvio Berlusconi’s political ambitions got a huge yawn on Thursday from both the bond markets and his fellow European conservatives, who instead heaped praise on the country’s current leader.
Europe has made clear its preference for Mario Monti, whom Berlusconi has in the space of the last week alternately criticized for his economic policies and invited to run under the moderate banner in Italy’s upcoming national elections.
At a summit of European center-right parties in Brussels attended by both men, political leaders lauded Monti’s technocratic government for his deft handling of the Italian economy since Berlusconi resigned in late November 2011, having failed to persuade markets he could come up with convincing reforms.
Europe’s major political party of the center right, the European People’s Party, “supports Mario Monti and not Silvio Berlusconi,” Dutch Prime Minister Mark Rutte said at the conference. “European populists appreciate the results achieved by Monti.”
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Italian elections are expected to be held in February, accelerated by about a month after Berlusconi’s backers in Parliament withdrew support for the Monti government and Monti responded by saying he would resign after lawmakers pass the budget, expected by the end of the year.
Berlusconi has vacillated over whether or not to run for a fourth term as prime minister, announcing on the weekend he would run and then saying on Wednesday he will step aside if Monti decides to run under the moderate banner.
Monti does not formally belong to any political party and has not disclosed any future political plans – though he has said he is open to a second term.
European conservatives made pointedly clear they would prefer the euro-friendly Monti remain at the helm. But Berlusconi insisted he did not feel betrayed by the attention Monti was getting.
`’Mistrusted? No, I feel embraced, in fact very embraced,” Berlusconi told reporters after the summit.
Giulio Tremonti, who was economics minister in Berlusconi governments, criticized European conservatives, saying on Italian private TV La7 that the comments `’in an electoral period are unacceptable. We are in a sovereign country and they cannot tell us who to vote for.”
Former Premier Lamberto Dini, who ran a technical government in the 1990s, said he found Europe’s response in recent days to a possible Berlusconi comeback “a bit undemocratic and excessive.”
“It is his right to run,” Dini said at a European Council event in Turin. “Let’s see what his final decision is.”
The latest polls taken after an announcement by Berlusconi that he would run showed a very modest improvement for his People of Liberty Party, to just 15 percent. And reaction within the party has been mixed, with several notable dissenters, including former Foreign Minister Franco Frattini.
“This suggests that Berlusconi’s announcement, while stopping the loss of support experienced over the last few months, failed to provide a meaningful boost,” Unicredit analysts Chiara Corsa and Loredana Federico said in a note.
The bond market didn’t seem particularly troubled by Berlusconi’s back-and-forth. Italy easily raised (EURO)3.5 billion ($4.5 billion) in the sale of 3-year bonds Thursday, with interest rates, or yields, dropping to the lowest level in two years. Italy paid an interest rate of 2.5 percent, compared with 2.64 percent last month.
“No one really cares about Berlusconi,” said Michael Hewson, a senior analyst at CMC Markets in London. “I would suggest he is white noise. … The markets are fairly comfortable with the political situation in Italy, now that they have had time to assess after Monday.”
Nicholas Spiro, a managing director of Spiro Sovereign strategy, says that the bond market is able to shrug off uncertainty over Italy’s upcoming parliamentary elections thanks to the European Central Bank’s bond-buying program. The ECB in September unveiled a plan to buy the bonds of struggling countries, lowering their borrowing rates, if they first agree to a European rescue program that includes conditions on their budget policies.
“Sentiment toward Italy is being heavily shaped by the ECB’s new bond-buying program,” he said. `’Italian politics is playing second fiddle to the pledge of unlimited support from the ECB.”