Italy's Senate approves economic reform measures

The Italian Senate
REPORTING FROM ROME -- The Italian government, seeking to mollify financial markets threatening to crash its finances, took a major step Friday toward passing a budget and an economic reform bill that could clear the way for Prime Minister Silvio Berlusconi's departure as early as Saturday.

The Senate voted, 156-12, to approve the so-called financial stability law demanded by the European Union, which is seeking to contain Italy's debt crisis before it engulfs the Eurozone's third largest economy.

The stability bill and an amendment attached to it are expected to clear Parliament's lower chamber on Saturday. The 75-year-old premier, who has become a focal point of Italy's debt troubles, agreed on Tuesday to step down after the reform measure passes.

Berlusconi is expected to be replaced by Mario Monti, a former European commissioner who spearheaded the antitrust suit against Microsoft. Italy's president, Giorgio Napolitano, on Wednesday named Monti, 68, senator for life, setting the stage for his appointment as prime minister.

However, it wasn't clear whether Monti would be able to muster the needed majority in the intensely fractured Parliament. If no majority coalition can be formed, it would most likely lead to a special election early next year, a scenario that could add further pressures on Italy's borrowing costs.

Establishing a stable and functional Rome government is seen as a crucial step to restoring credibility among bond investors and European leaders, who are pressing Italy to act quickly to get its finances in order.

Mario Baldassarri, an opposition member of the Senate who heads the Finance and Treasury Committee, said Friday that he believed Monti would obtain the majority support he needs to be seated as prime minister.

The problem, Baldassarri said, is that the reform bill contains a previously constructed budget and no real specifics on the economic restructuring needed to balance the budget and maintain economic growth. So Monti and the newly formed government, he said, will face the difficult task of developing those restructuring provisions -- and then trying to obtain a majority to pass the package.

Among the measures that the EU has called for are public spending cuts, pension reform, liberalization of services and greater labor flexibility. But some of these steps are likely to face significant opposition from entrenched interests and a public that has become highly suspicious of Italy's political system and EU demands.

On Friday, there were pockets of protests in Rome. In one demonstration, scores of mostly young people hoisted banners criticizing Monti and the head of the European Central Bank as police blocked the street.

Giorgio Capitani, 32, a hotel worker and part-time student, joined a cluster of people in front of Rome's Treasury and Economic Ministry building. Capitani said she was protesting plans by the government to privatize the city's water services, despite a referendum in June that prohibited it. 

She blamed the privatizing drive on pressures from the EU, which she and others fear is now calling the shots.

"It's clear there is a sovereignty problem," Capitani said. "The European Union imposes some measure, but if there is a national referendum against it, in that case it's clear there are two governments," she said, "one government of Europe and one government of citizens."

As night fell, the demonstrators were trapped by a cordon of police along a cobbled street behind the Treasury Ministry's building. Police demanded that the protestors, many of them students, produce identification documents. Some refused, then the demonstrators sat down in the street, shouting "Shame! Shame!"

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-- Don Lee

Photo: The Italian Senate during a session Friday on economic reform measures demanded by the European Union. Credit: Andreas Solaro / AFP/Getty Images

 
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