Italian PM Letta will resign: What happens next?

Italian Prime Minister Enrico Letta has announced he will tender his resignation to Italian President Giorgio Napolitano tomorrow. The dramatic development comes after Italy's centre-left leader Matteo Renzi addressed a meeting of his Democratic Party earlier today. A few minutes before Renzi took the floor, it emerged Letta would not be attending the meeting - a clear sign of where things were going.

The three key points of Renzi's speech were:

• Letta has done a great job, but it's time to give way to a new government (that Renzi will lead);
• Snap elections now would be too risky, primarily because the electoral law hasn't been changed yet;
• The new government will aim to stay in office until 2018 - when the current parliamentary term expires.

It now seems certain that the 'staffetta' (relay) will materialise - and we expressed our thoughts on the move in our previous blog post.

So what happens next? If you're regular readers of this blog, you should know the drill by now - but just in case:

• Letta will meet President Napolitano tomorrow, and will hand in his resignation;

• Napolitano will then have to consult all the political groups holding seats in the Italian parliament. The timetable is usually announced after the Prime Minister resigns, but we reckon it could happen over the weekend; 

• After the talks, Napolitano should give Renzi the mandate to form the new government - presumably early next week;

• After holding his own round of talks with other political leaders, Renzi should then unveil the list of ministers (we'd expect a rather substantial reshuffle from the current cabinet), and should be sworn in;

• After being sworn in, Renzi will have to face a vote of confidence in both houses of the Italian parliament - which, as things stand now, should be a mere formality. 

This is all you need to know to make sense of the latest political developments in Italy. For real-time updates, you can follow us on Twitter @OpenEurope and @LondonerVince.

Italian government on the brink (again): Has Renzi's hour come?

‘Staffetta’ is the most used word in the Italian media these days. It literally means ‘relay’, and it refers to the

possibility of Prime Minister Enrico Letta handing over power to a new coalition government led by Matteo Renzi – the Mayor of Florence who was elected as the new leader of Mr Letta’s centre-left Democratic Party in December.

The two are holding talks in Rome as we write this blog post, ahead of a key party meeting scheduled for tomorrow. Speculation is growing in some Italian papers that Mr Renzi already has a list of ministers in mind.

If the takeover does materialise, as looks increasingly likely if you scan the Italian press, a few points are worth keeping in mind:

• The change of government would not change the numbers in the Italian parliament, where no party holds a majority in the Senate, the upper chamber. Renzi may be able to muster wider parliamentary support than Letta, but he would still be stuck with a diverse coalition with smaller centrist and centre-right parties – meaning that the difficulties in pushing ahead any significant political and/or economic reform would not evaporate. 

• The handover of power would happen without an election, something which could backfire in terms of Renzi’s image vis-à-vis the electorate – not least because the Mayor of Florence has been clearly saying that he wasn’t keen on replacing Letta without a vote. 

• Therefore, a better option at this point might be to pass a new electoral law quickly and call snap elections. The electoral law currently being discussed is not perfect, but it would make sure that the winning party/coalition would secure a solid majority in both houses of the Italian parliament. It could be done in time for the beginning of Italy’s rotating EU Presidency on 1 July. Indeed, this would mean two months of political paralysis because of the electoral campaign. But despite all the good intentions, Mr Letta’s government has so far hardly delivered on the big reforms it was supposed to implement. Most importantly, at the end of the process Italy would have a government which has actually come out of the polls – rather than negotiations among party leaders.

Berlusconi virtually out of Italian parliament, but clearly not yet out of Italian politics

The Italian Senate's Immunities Committee has recommended that Silvio Berlusconi be ousted from parliament as a result of his recent tax fraud conviction. The Committee will now submit a motion to the full Senate for approval within the next 20 days. The final plenary vote is supposed to be a mere rubber-stamping exercise, so we wouldn't expect any surprise. 

A couple of quick thoughts:

• The expulsion from parliament would certainly be a hard blow for Berlusconi, but wouldn't mean the end of his political career. With all due differences, comedian Beppe Grillo has shown that it's fully possible to lead a party from outside parliament. 

• Most importantly, Berlusconi's large public support is unlikely to evaporate overnight. In the eyes of many Italians, Il Cavaliere remains the example of a successful self-made entrepreneur - and the victim of a conspiracy of left-leaning judges.

• Indeed, once the process to expel him from parliament is completed, Berlusconi will find himself with a couple more trials under way - and no more parliamentary immunity. However, he remains unlikely to spend any time behind bars because of his age.

• That said, the key aspect at this stage is perhaps what will happen to Berlusconi's party in the near future. As we noted in our previous blog posts, the confidence vote in the Italian Senate earlier this week triggered a mutiny that ultimately forced Berlusconi to an unexpected U-turn. Things seem to have cooled down a bit, but the risk of a party split off the back of Wednesday's rebellion remains. This would be a bigger setback than the loss of a seat in parliament.

• On a more general note, one of the reasons why Berlusconi still looks likely to remain a rather influential figure in Italian politics is the lack of an obvious substitute to take the lead of Italy's centre-right forces. So far, Berlusconi has to a large extent, either by hook or by crook, been able to keep his side of the political divide together. The day he leaves the stage, we may well witness the fragmentation of that side of the Italian political spectrum. The impact of such a split on the country's political stability is difficult to predict at this stage.

Italian PM Letta survives key confidence vote: What's next for Italy?

What looked like an imminent political crisis has just been defused in Italy. As we anticipated in our previous posts (see here and here), Italian Prime Minister Enrico Letta has managed to survive a vote of confidence in the Senate - the upper chamber of the Italian parliament where his Democratic Party doesn't hold a majority.

In a last-minute U-turn, Silvio Berlusconi has decided that his party would support the government after all - turning a potential showdown into a mere formality. Nonetheless, what just happened in the Italian Senate does have consequences for the future of Italian politics. Here are a couple of thoughts.

1. Letta stays on, but uncertainty remains over what his government can deliver

The first, and most obvious, immediate consequence of today's vote is that Enrico Letta can stay on as Italian Prime Minister and maintains, at least on paper, his overwhelming parliamentary majority. However, it remains to be seen what Letta and his cabinet can deliver in terms of bold, concrete measures to get Italy going again - not least because some fundamental differences between the parties forming Italy's ruling coalition will remain.

One may argue that, faced with a party mutiny ahead of today's vote, Berlusconi would have finally learnt his lesson and would think twice before triggering new crises in future. But we wouldn't rule out new coalition rows. Berlusconi is famous for his CEO-style handling of his party, and he tends to take all the big decisions on his own - which makes him a very unpredictable coalition partner.    

Another important issue is: how long will Letta stay in office for? It's no secret that both him and Italian President Giorgio Napolitano would like the current government to continue at least until after Italy's rotating EU Presidency (July-December 2014) - and then perhaps go to early elections at the beginning of 2015. This would still be much earlier than 2018, when the current parliamentary term is supposed to end.

Questions will also remain over whether, if the crisis deepened once again, Italy would really be able to gain access to the ECB’s bond-buying programme, the OMT. As we mentioned above, Letta has clearly won the day - but uncertainty remains over his government's ability to push through unpopular measures.

Crucially, the ECB has made it clear that any country accessing the OMT must have a credible government in place to enforce the necessary conditionality attached to bond purchases (very likely to involve significant structural reform and budget cuts).

2. This is not the end for Berlusconi, but he's just been dealt a hard blow 

There's another reason why today's confidence vote is significant. Looking beyond the appearances (and the last-minute coup de théâtre) Silvio Berlusconi has, in substance, seen his plan to bring Letta's government down disrupted by a rebellion from within his own party. Last weekend's decision to pull his ministers out of cabinet has therefore proved a miscalculation, and will have at least two consequences:

• Berlusconi's threats to bring the government down if he's voted out of parliament as a result of his recent tax fraud conviction are no longer credible; 

• 25 senators from Berlusconi's party have this morning announced the creation of a breakaway group in the Italian Senate, irrespective of how the rest of the party would have voted. Though far from certain at this stage, today's defectors may well decide to follow up and quit Berlusconi's party - which in turn may reduce Il Cavaliere's electoral strength.

Berlusconi has shown his resilience several times, so we are unlikely to be witnessing the end of his political career just yet - even after he's ousted from parliament. Let's not forget that polls suggest he maintains quite large public support, with the help of his control over a large swathe of the media. We wouldn't expect him to take this challenge lying down. That said, his leadership of Italy's centre-right forces has today unequivocally been put into question.

These are our preliminary thoughts. We'll continue monitoring the situation in Italy very closely, so keep following us on Twitter @OpenEurope and @LondonerVince for all the updates.

Things looking rosier for Italian PM Letta, as Berlusconi faces potential mutiny

As we argued in our post yesterday, it was "not unrealistic" for Italian Prime Minister Enrico Letta to win tomorrow's vote of confidence in the Italian Senate, even if, on paper, he didn't have the numbers to do so.

A potentially key development now seems to confirm our first impression. Carlo Giovanardi, a centre-right Senator and a senior member of Silvio Berlusconi's party (see picture), has just confirmed earlier rumours that a new pro-Letta group of 'rebel' centre-right senators is to be formed, and will support the government tomorrow.

Giovanardi said,

"We do have the numbers [to form a new group], we are even more than 40, and we firmly want to maintain the balance of the government. This is why we will give [Letta] our vote of confidence." 

Clearly a game-changer. If this new group comes through with the votes, then Letta will have a much bigger chance of winning the vote of confidence and staying in power.

Equally significantly, if Berlusconi keeps pushing for a showdown but Letta ends up winning the confidence vote thanks to defectors from Il Cavaliere's party, this will almost inevitably have consequences for the future of the centre-right in Italy.  

Keep following us on Twitter @OpenEurope and @LondonerVince for real-time updates.

Italy plunged into fresh political turmoil: End of the line for PM Letta?

UPDATE (18:15) - Silvio Berlusconi has just come out of a meeting with MPs and Senators from his party. According to reports in the Italian media, he has outlined the following roadmap: a quick vote on the 2014 budget and a couple more economic measures (Berlusconi apparently said this can all be done in one week), followed by snap elections.

Not sure this can represent a good basis for a potential compromise with Enrico Letta's centre-left Democratic Party - not least since Berlusconi's strategy seems to imply a return to the polls without changing Italy's controversial electoral law first. We explained in our original blog post from this morning why this could be a huge gamble.

UPDATE (15:45) - Italy's Minister for Relations with Parliament, Dario Franceschini (from Enrico Letta's party) has just confirmed that the Prime Minister will address the Italian Senate on Wednesday morning and the Chamber of Deputies on Wednesday afternoon.

However, Mr Franceschini also stressed that a confidence vote after the debate is "very likely", but will ultimately "depend on how the debate will go". We think there are two possible interpretations here, depending on whether one wants to see the glass half full or half empty:

1) Mr Letta is still confident Berlusconi could backtrack on his plan to bring the government down;

2) If, based on the statements made by the various political groups during the debate on Wednesday morning, Mr Letta were to deem the confidence vote in the Italian Senate absolutely impossible to win, he may decide to skip it and tender his resignation straight away.

ORIGINAL BLOG POST (9:30)  

For regular readers of this blog (see here, here and here), Silvio Berlusconi pulling the plug on Italy's fragile coalition government was just a matter of time - especially after his conviction for tax fraud. On Saturday, Il Cavaliere ordered ministers from his party to resign and called for snap elections.

The official reason for doing so was the Italian government's inability to scrap a VAT increase planned by the previous technocratic cabinet led by Mario Monti, due to kick in tomorrow. However, it would be naïve to see no correlation with the fact that Berlusconi is to be ousted from parliament within the next few weeks as a result of his tax fraud conviction. 

So what happens next? The moment of truth will be on Wednesday, when Prime Minister Enrico Letta will seek a vote of confidence in both chambers of the Italian parliament. The key vote will be the one in the Senate, the upper chamber, where Mr Letta's centre-left Democratic Party does not command a majority on its own.

Scenario 1 - Letta survives the confidence vote in the Senate

Tough, but definitely not unrealistic. Letta needs around 20 Senators from either Berlusconi's party or Beppe Grillo's Five-Star Movement to break ranks and support him. Over the past few days, politicians from both parties have hinted at possible defections. Crucially, after tendering their resignations, four of Berlusconi's ministers have expressed reservations over their leader's decision to open a new political crisis at this stage. All this suggests Letta does have a chance of winning the vote in the Italian Senate, and staying in power with a different, albeit thinner, parliamentary majority (and after a rather substantial cabinet reshuffle).

However, this would only be a temporary fix. With his new majority, Letta could try and address a couple of urgent issues (a reform of Italy's tortuous electoral law and the budget for 2014 are the most obvious) - and perhaps plan for early elections at some point next year.  

Scenario 2 - Letta loses the confidence vote

If Letta loses the confidence vote, he will have to resign. As we explained several times, the ball would then be in Italian President Giorgio Napolitano's court. Napolitano would have to hold talks with all the political parties and then make a decision: task Letta himself or someone else with forming a new government, or dissolve parliament and call new elections.

New elections in Italy can take place no less than 45 days after parliament is dissolved. The risks of a quick return to the polls are obvious. Voting again with the same electoral law may well lead to another inconclusive outcome - meaning that Italy could be facing a few months of political paralysis at a time when the country can least afford it. As if things were not complicated enough, the electoral law is currently also being examined by the Italian Constitutional Court, with a ruling expected in early December - and is at risk of being declared at least in part unconstitutional.

This is where we are at. Clearly, none of the two scenarios would provide the medium-term political stability Italy needs to get its act together - which in itself is not great news for both the country and the eurozone as a whole. Everything will depend on how Wednesday's vote of confidence goes.

Follow us on Twitter @OpenEurope and @LondonerVince for all the updates. 

Vice-President of Italian Senate has a go at 'Mr Nobody' Olli Rehn

Maurizio Gasparri, a senior member of Silvio Berlusconi's PdL party and a Vice-President of the Italian Senate, yesterday launched one of the toughest verbal attacks on a member of the European Commission we can think of over the past months, if not years. His target was EU Economic and Monetary Affairs Commissioner Olli Rehn, and here's what Mr Gasparri said,

It's time to stop it with the 'corporals of the day' such as this Olli Rehn, a Mr Nobody who comes to Italy acting as a supervisor. He should rather meditate on the disasters that people like him have caused by destroying Europe. Thick bureaucrats who kill the peoples [of Europe] and make the continent die because of China’s unfair competition and [their] ruinous economic policies. This Rehn is persona non grata. He should take a plane, go back home and pay as many taxes he likes.

But what prompted this rant? Very simple. During a hearing in the Italian parliament earlier in the day, Rehn had noted that the abolition of a controversial property tax on first homes – one of Berlusconi's flagship electoral pledges – was not in line with the European Commission's economic policy recommendations to Italy, and cast doubts over the country's ability to meet the deficit targets agreed with Brussels.

Interestingly, Mr Gasparri's critical reaction to Rehn's remarks was not the only one of the day either, though arguably the most colourful. Stefano Fassina, Italy's centre-left Deputy Economy Minister, also invited Rehn to "think about the mistakes the European Commission has made in all these years instead of continuing to give us lessons." Another sign that 'austerity fatigue' in Italy is also mounting among a number of top politicians, not just the citizens.   

Berlusconi's swan song may not be easy listening for Letta

September has come, and summer is (almost) over - but the heat won't leave Italy for a bit. The Italian Senate's Immunities Committee has begun debating whether to strip Silvio Berlusconi of his seat as a result of his recent tax fraud conviction. As we wrote on this blog several times (see here, here and here), the outcome of the vote that will follow this debate could be decisive for the future of Prime Minister Enrico Letta's shaky coalition government.

A quick recap:

• Under Italy's new anti-corruption law, Berlusconi won't be able to stand for election for the next six years due to his tax fraud conviction. As we said, he also risks losing his seat in the Italian Senate.

• Berlusconi's PdL party wants to delay the vote in the Senate's Immunities Committee, arguing that the opinion of the Italian Constitutional Court and the ECJ should be sought first. The legal reasoning behind the request is that, according to Berlusconi's party, the anti-corruption law can't be applied retroactively - that is, it doesn't cover crimes committed before its entry into force in December 2012. The problem is the other parties (including Mr Letta's Democratic Party, currently in government with Berlusconi's PdL) are not on the same wavelength and want to wrap everything up as quickly as possible.

• A preliminary vote on the request to refer the matter to the Constitutional Court and the ECJ could take place tonight or tomorrow. It remains unclear when the final vote will happen. However, several key members of Berlusconi's party have made clear that, if the Committee refuses to delay the final vote, it will be the end of the coalition with Mr Letta's Democratic Party.

In other words, Italy seems to be heading towards fresh political instability. If the existing coalition collapsed, snap elections would become a concrete possibility - but not the only one. The ball would once again be in the court of Italian President Giorgio Napolitano, who would presumably try and put together an alternative majority (with the help of 'rebel' Senators from Beppe Grillo's Five-Star Movement and Berlusconi's party) before throwing the towel in and dissolving parliament. 

Colpevole: Supreme Court had bad news for Berlusconi (and the Italian government)

It took everyone a while to figure out what the Supreme Court final verdict in Silvio Berlusconi's tax fraud case meant in practice. Let's start from the easiest part: the four-year prison sentence has been definitively upheld. As we explained here, Berlusconi will only have to serve one year in reality - with house arrest or community service the most likely options, given his age.

The Supreme Court also said the five-year public office ban was excessive under Italian law and had to be cut down - so it referred it back to the Court of Appeal for review. In other words, it seemed Il Cavaliere had at least temporarily dodged the ban - arguably more important than the prison sentence from his point of view.

However, a new twist to the story emerged last night. Under Italy's new anti-corruption law, which was passed at the end of 2012 by Mario Monti's technocratic government, Berlusconi will not be allowed to stand for election for at least six years as a result of his tax fraud conviction. In practice, this means Berlusconi will not be able to run in the next Italian elections even if Letta's government saw through the entire five-year parliamentary term.

But there's more: Berlusconi also risks losing his seat soon(ish). According to the same law, the Italian Senate will have to vote on whether to expel Berlusconi with immediate effect. This vote will probably take place at some point in September - and will turn into a key test for the stability of Italy's coalition government.

So, in substance, the lose-lose scenario for Italian Prime Minister Enrico Letta's Democratic Party that we discussed here is materialising after all:

• If the Democratic Party votes to expel Berlusconi, it will put Italy's coalition government at risk;

• If the Democratic Party votes to keep Berlusconi in, it will put itself at risk of internal strains and criticism from angry voters. It would also provide a boost to Beppe Grillo's anti-establishment rhetoric.

At some point Mr Letta will have to decide whether it is acceptable for his party and his electorate to stay in government with a party whose leader has just been convicted for tax fraud. Italy's short-term political stability could also depend on the answer to this question.

Following the verdict, Berlusconi made a rather emotional statement. It was a political 'call to arms' for his supporters, with no mention of Letta or the future of Italy's coalition government. Berlusconi insisted he is the victim of "judicial doggedness without equal in the civilised world" and pledged to "fight on". We are pretty sure he will.

Did the EU instruct Rome to “unplug” Berlusconi?

If true, this is quite extraordinary.

Fabrizio Goria - business and finance correspondent of the Italian online news site Linkiesta - has recently taken a look back at the Italian crisis towards the end 2011. An English version of the article is available on the LSE's Europe blog. With Italian borrowing costs reaching record highs, he writes that European Commission President Jose Manuel Barroso instructed the then Interior Minister Roberto Maroni (of Lega Nord) to "unplug" Silvio Berlusconi, who was the Prime Minister at the time.

Goria writes:

"In those dark days, with the 10-year Bund-BTP spread close to a historical peak, a unique incident occurred. During an institutional meeting, the then minister of internal affairs Roberto Maroni received a phone call. It was towards the end of October. People attending that meeting, a select group of associates, reported that he turned pale. The call came from José Manuel Barroso [who] was very clear with Maroni: “I don’t want you to take this personally. Neither you nor all other members of the government. But you need to “unplug” Berlusconi.” And in that moment Barroso revealed what the strategy was: a flurry of declarations against the then prime minister. From all fronts, from every European policy maker. The message to be sent was one and one only: Berlusconi is inadequate."

Ten days later, Berlusconi resigned.

It was extensively reported at the time that German Chancellor Angela Merkel and then French President Nicolas Sarkozy (who are obviously much more powerful than Barroso) were putting enormous pressure on Berlusconi to take a hike - and it was always assumed that Berlusconi's departure was at least in part due to European pressure.

However, this would be the most explicit intervention known to date. Now, we haven’t seen this reported anywhere else – and given that it is evidence that the EU fell just short of toppling a democratically elected leader – we'd expect it to be all over Italian and international media.

So we take it with a pinch of salt – but, as always, we’re keen to know what our readers think…

Verdict day for Berlusconi: Could a lose-lose scenario materialise for Letta?

Supreme Court judges in Rome have started deliberating, and the final verdict in Silvio Berlusconi's tax fraud case is expected by this evening. The former Italian Prime Minister is appealing against a four-year jail sentence and a five-year public office ban (see our reader-friendly Q&A for more details).

If the Supreme Court upholds the conviction, it would be the first time Berlusconi is issued with a definitive sentence, with no more appeals left. However, two further points of background are worth noting:

• As we explained in our Q&A, if Berlusconi were convicted by the Supreme Court, the Italian Senate would have to vote on whether to lift his parliamentary immunity. However, the immunity would not cover the jail sentence - which would be enforced anyway because it would be a definitive one (although in practice it would almost certainly amount to house arrest, given Berlusconi's age). 

• A majority of Italian Senators could potentially overturn the Supreme Court ruling on this point. This would mean that Berlusconi would not have to resign as a Senator, and would be allowed to stand for election in future.

Interestingly, Prime Minister Enrico Letta's centre-left Democratic Party (currently in a coalition with Berlusconi) could face a lose-lose situation there:

• If the Democratic Party helped vote Berlusconi out of parliament, it could put the government at risk.

• If the Democratic Party voted against the public office ban, it would presumably annoy many of its voters and allow Berlusconi to continue to exert direct influence on Italian politics. It would also provide ammunition to someone like Beppe Grillo, who would instantly claim that 'La Casta' (the caste) has closed ranks to protect Berlusconi. Of course, the Italian Senate going against a Supreme Court ruling would also be a pretty big thing.

Now, we have the joy of waiting for the verdict. Stay tuned @OpenEurope and @LondonerVince.

Q&A: All you need to know about Berlusconi's tax fraud trial and its potential implications for the Italian government

UPDATE (19:20): Supreme Court prosecutor Antonio Mura has just requested that Berlusconi's public office ban be cut to three years. The four-year prison sentence should be upheld, he said.

A very interesting development, although the Supreme Court would obviously be free to uphold the entire five-year ban if it wanted to. As we noted in our blog post from this morning, we will have to wait until tomorrow (or maybe even Thursday) before the final verdict is read out.

OUR ORIGINAL BLOG POST (10:58) 

The final hearing of Silvio Berlusconi's tax fraud case (the so-called 'Mediaset trial') has started in Italy's Supreme Court this morning. However, according to the Italian media, the verdict is likely to be read out tomorrow - or even on Thursday morning.

We thought a short Q&A would help highlight the potential significance of the ruling:

1. Which trial are we talking about? And where are we at?

We are talking about the so-called Mediaset trial, where Berlusconi faces tax fraud charges. The former Italian Prime Minister was found guilty by both the first-instance court and the Court of Appeal. He was sentenced to four years in prison and a five-year ban from holding public office. Therefore, he appealed to the Supreme Court. The Supreme Court is Italy's highest court, meaning that Berlusconi would have no more appeals left if the conviction were upheld.   

2. But he can still be acquitted, right?

Of course. The court can decide to clear Berlusconi completely. Or it can rule that the case must be re-examined by the Court of Appeal. This would increase the likelihood that the tax fraud charges against Berlusconi time out - since Italy's statute of limitations would kick in at some point during the late summer of 2014.

3. What happens if the Supreme Court upholds the conviction? Would the sentence be immediately effective?

No. Berlusconi is a Senator, so he is protected by parliamentary immunity. Therefore, a vote in the Italian Senate's Immunities Committee and a vote in the Senate plenary (most likely through a secret ballot) would be needed before the public office ban can be enforced. Berlusconi's party could be easily outvoted in both cases, but the outcome would be far from guaranteed in reality - not least because Berlusconi's party could threaten to withdraw its support to Prime Minister Enrico Letta's coalition government if the votes go 'the wrong way' from its point of view.

4. Would Berlusconi be likely to spend any time behind bars?

No. If the four-year prison sentence were upheld, three years would be remitted anyway due to an amnesty law passed by Romano Prodi's centre-left government in 2006. This would leave Berlusconi (a 77-year-old man) with only one year to serve - making either house arrest or community service the most likely options.

 5. Okay. Now, let's assume the Supreme Court upholds the tax fraud conviction and the Italian Senate rubber-stamps the public office ban. Berlusconi has to resign and is banned from holding public office for the next five years. What happens to the Italian government?

The short answer is, "Nobody knows". Several senior members of Berlusconi's party have evoked drastic retaliation (withdrawal from government, resignation en masse of Berlusconi's MPs and Senators, snap elections, and so forth). The truth is Il Cavaliere would make the final decision - and his party would then almost certainly follow the leader. Sure enough, there would be the potential to trigger a political crisis in Italy.

6. Could this be the end of the line for Berlusconi's political career?

Not entirely. Even if served with a five-year public office ban, Berlusconi could continue to lead his party - although he would not be allowed to stand for election. 

As usual, we recommend you follow us on Twitter @OpenEurope and @LondonerVince for all the updates from Rome.

Is Italy already heading for fresh political uncertainty?

Last month, we wrote on this blog that Silvio Berlusconi's well-known 'Ruby trial' posed no immediate threat to the stability of Italy's coalition government. Instead, we noted, the real risk was the less titillating 'Mediaset trial' - where Berlusconi is accused of tax fraud and could be banned from holding public office for five years.

Recent events seem to prove us right. Italy's Supreme Court has announced that it will issue the final verdict in the tax fraud trial on 30 July - much earlier than expected. The announcement has triggered a huge backlash from Il Cavaliere's camp and is showing once again just how fragile Italy's coalition government is.

Berlusconi's party wants to suspend all parliamentary activities for three days in protest against the Supreme Court's decision, or it will pull out of the coalition - which would deprive Enrico Letta's government of its majority in parliament and potentially make snap elections a real prospect.

The impression is that, even if this immediate threat were turned down, the survival of the Italian government may be put in doubt again shortly should the Supreme Court uphold the five-year public office ban for Berlusconi - making it definitive.

In the meantime, Standard & Poor's yesterday cut Italy's credit rating by one notch to BBB, leaving it on a negative outlook and only a few notches above 'junk' level, citing concerns over economic output growth as a key reason for the decision. A gentle reminder that the country remains under market surveillance and the way out of the woods is still quite long.

A bad time to trigger a fresh political crisis.      

Could Berlusconi's trials put the Italian government at risk? Not immediately, but...

The news didn't exactly go unnoticed in the media across Europe, but just in case: Italy's former Prime Minister Silvio Berlusconi has been sentenced to seven years in prison and a lifetime ban from holding public office in the well-known 'Ruby trial'. The usual caveats apply:

• The sentence is not immediately effective, because Berlusconi has the right to two further appeals. Given that it took 26 months to get to yesterday's ruling, the trial will not be concluded anytime soon;

• Berlusconi will turn 77 in September, meaning that he is unlikely to serve any time in prison anyway because of his age.

Clearly, the big question is what impact Berlusconi's trials could have on the stability of Italy's coalition government - whose survival depends on support from his PdL party. The short answer is: no-one knows.

So far, Berlusconi has consistently stressed that these are two separate issues, and his "loyal support" for Prime Minister Enrico Letta will not be affected by the outcome of his trials. However, caution is needed for one very simple reason. Berlusconi may be playing the responsible statesman right now, but this is in part because none of the rulings against him are definitive, yet.

Remember Berlusconi is facing several different trials at the moment. One of them (the Mediaset trial, where he is accused of tax fraud) is drawing to a conclusion, with the final verdict from Italy's Supreme Court expected by the end of the year, or in early 2014 at the latest.

If the Supreme Court were to upheld the previous two rulings, Berlusconi would face a four-year prison sentence and a five-year public office ban - which would virtually mark the end of his political career. At that point, the consequences for the Italian government would really be unpredictable. A key member of Berlusconi's party, Senator Maurizio Gasparri, even suggested that, if the former Italian Prime Minister were issued with a definitive public office ban, all his MPs and Senators could resign en bloc.

Berlusconi will meet Prime Minister Letta this evening. In theory, the meeting should focus on this week's EU summit - but the ruling will almost inevitably be discussed as well. We will keep you posted about any interesting developments via Twitter @OpenEurope. 

Berlusconi: Let's breach EU deficit rules, no-one would throw us out

With the next meeting of EU leaders only one week away, Silvio Berlusconi has stepped his anti-austerity rhetoric up by a few notches. He said yesterday,

"We need someone from the [Italian] government to go to Brussels and tell those gentlemen, ‘We are in this situation because of your damn austerity policies. We must put things back in their place. From now on, you can forget about the fiscal pact and the deficit limit of 3% of GDP. Do you want to throw us out of the single currency? Go ahead. Do you want to throw us out of the EU? Well, we’d like to remind you that we pay €18bn a year [into the EU budget] and only get €10bn back’. Who would throw us out?"

As usual when Berlusconi is involved, these incendiary remarks form part of a broader communication strategy. Following his party's poor showing in the latest round of mayoral elections, Berlusconi wants to make clear to his electorate that he is still dictating the agenda to Italy's coalition government - and that he means business when it comes to keeping his flagship electoral promises, be it about scrapping a property tax on first homes or putting an end to EU-mandated austerity.

However, this time the explicit invite to ignore EU deficit rules is in clear contradiction with the line taken by Italian Prime Minister Enrico Letta so far: Italy does want an easing of austerity at the EU level, but will keep its deficit below 3% of GDP and respect all its commitments. Therefore, Berlusconi's words risk shaking the coalition government at home, and undermining Italy's credibility vis-à-vis its eurozone partners.

It will be extremely interesting to see if, once in Brussels next week, Mr Letta pretends his coalition partner Berlusconi never said those words or takes Il Cavaliere's advice on board and adopts a tougher anti-austerity stance with German Chancellor Angela Merkel and the other Northern eurozone leaders.  

Berlusconi wants to say 'basta' to EU diktats

Silvio Berlusconi's interviews never go unnoticed. Yesterday evening, he told Italian TV channel T9 that:

"We now have a strong government…also vis-à-vis Europe. We need this government to go to Brussels and say ‘I’ll do it this way’. We can no longer accept certain diktats. It’s for us to decide what needs to be done to put our economy back on its feet." 

Our regular readers know this is not the first time Berlusconi uses this type of rhetoric (see here and here for similar remarks). But his words have a much greater significance now. The electoral campaign is over, and Berlusconi's party holds a number of key ministerial posts in the new Italian government - on which he can pull the plug whenever he likes.

As we noted before, Berlusconi's blackmailing power could lead to Italy taking a tougher anti-austerity stance in Brussels - and this is exactly what Il Cavaliere is trying to achieve. Pressure is now on Italian Prime Minister Enrico Letta, who has so far been a lot milder in his demands for an easing of austerity and has consistently stressed that Italy will stick to its EU commitments.

Letta can't ignore Berlusconi's requests, or the survival of his 'grand coalition' will be at risk. But he will also have to make these requests sound acceptable to German Chancellor Angela Merkel - who faces a general election in three months' time. Not the easiest of tasks.

Italian PM launches opening salvo against austerity - but where will the cash come from?

The new Italian Prime Minister Enrico Letta announced his first raft of policies in his first speech to the Italian parliament yesterday. The speech was strong on anti-austerity rhetoric but short on details of how his new approach would be funded - illustrating that ever-so-relevant dilemma in the eurozone (and elsewhere): it's easy to criticise austerity, much harder come up with alternatives. Here are the key points:

·    The government will scrap up to €6bn worth of tax rises, although Letta provided no detail about how this funding gap would be filled. Much of this move was motivated by Silvio Berlusconi’s insistence on scrapping a new housing tax which was laid out as a precondition for the formation of the grand coalition

·    Some phrases which will make German Chancellor Angela Merkel wince, such as: “We will die of fiscal rigour alone. Growth policies cannot wait any longer”, “[Europe faces] a crisis of legitimacy” and there is a need for a “United States of Europe”.

·    Letta believes Italy’s welfare system is inadequate and will look to broaden it to provide further help to women, young people and temporary workers.

·    Businesses will also receive tax incentives to hire young workers.

·    Again no details on how such policies will be funded. La Stampa reports that all in, the “Letta Agenda” could cost €20bn. He made no mention of privatisations or the sorely needed reforms to the labour and product markets to make Italy more competitive.

·    Letta did stress that Italy will meet all of its EU commitments and targets.

·    He set himself and the new government an 18 month window in which to achieve the some success in turning around the economy or “face the consequences”.

·    Promised to reform the electoral law and cut MP’s pay.

A very interesting opening salvo from Letta. In fact, not too dissimilar to French President Francois Hollande’s early comments regarding austerity – we can’t help but wonder if his enthusiasm and/or success will wane in a similar way.

One thing that is clear from the speech is the continuing power of Silvio Berlusconi (as we previously noted). La Stampa suggest up to €12bn of the cost of the ‘Letta Agenda’ actually comes from Berlusconi’s demands, while following the speech Angelino Alfano, the new Deputy PM and key Berlusconi ally, said, “I share the words of Enrico Letta’s speech from the first to the last. It is music to our ears.” Meanwhile, Berlusconi also took the opportunity to this morning ramp up his own rhetoric against austerity, calling for the new Italian government to “renegotiate its deficit commitments” with the EU.

All of this sets an interesting tone and background for Letta’s first meeting with Merkel which takes place this afternoon. As we have noted previously and at length, the key question surrounding this whole austerity debate remains, if not through cuts, then who will pay for the party? Germany and the ECB certainly aren't ready to foot the bill indefinitely and while market sentiment is positive now, it likely could not withstand a new spending spree in a country with a debt-to-GDP of 120% already. We suspect Merkel may make just that very point...

Italy's new Prime Minister: Pro-EU integration, anti-austerity?

We've detected strong demand for a quick profile on Enrico Letta, who has just been appointed Italy's new Prime Minister. With the debate raging over the wisdom or otherwise of German-style fiscal discipline in the eurozone, the big question is: is Letta against austerity? Here's a short bio:

• Letta is from Tuscany and will turn 47 in August. This means he's in line to become Italy's third-youngest Prime Minister ever. 

• He holds a PhD in European Law, and was appointed Europe Minister in 1998. At the time, he was 32 - which made him the youngest Italian minister ever. He also served as Industry Minister under Massimo D'Alema.

• Letta was an MEP between 2004 and 2006. 

• He's been the deputy leader of the centre-left Democratic Party since 2009.

• Importantly, he is a big AC Milan fan - which could help him win support from Silvio Berlusconi. Well, perhaps along with the fact that Enrico Letta is the nephew of Gianni Letta, Il Cavaliere's closest aide. 

So what about his political views and that key austerity point?

In his press statement after the meeting with President Giorgio Napolitano, Letta said Italy should be

"firmly committed to changing the direction of EU [economic] policies [which are] too focused on austerity, which as European Commission President [José Manuel] Barroso said the other day are no longer sufficient."

(Hallo, Angela!) 

And remember that when the EU won the Nobel Peace Prize, Letta tweeted the award should be

"a spur to be prouder, more concrete and effective in our pro-European stance. There's no future without the United States of Europe." 

This goes to show he is strongly in favour of more EU integration (though admittedly so are a majority of Italian politicians). In other words, Napolitano has appointed a Prime Minister with solid European credentials and who can credibly argue for an easing of austerity in the EU. Quite smart. 

Crucially, Letta also stressed the new government won't be formed "at any cost". This can be seen as a warning to Silvio Berlusconi not to set out too tough conditions for lending his support. However, it's worth bearing in mind that Berlusconi's centre-right alliance is ahead in all opinion polls - meaning Silvio is in a position of strength right now.

Letta will hold talks with all other political parties tomorrow. If things move on smoothly, we should have the list of ministers by the end of the week. Follow us on Twitter @OpenEurope and @LondonerVince for further updates from Italy. 

Italy has a new Prime Minister. And it's a surprise one...

Enrico Letta, deputy leader of Italy's centre-left Democratic Party and Pier Luigi Bersani's right hand, is very close to becoming Italy's new Prime Minister. He's currently meeting President Giorgio Napolitano (as you read this blog post), and will be given the mandate to form a new government.

Letta emerged as the main candidate in the last 24 hours. The fact that Napolitano has chosen Letta  is significant for at least two reasons:

• Letta is undoubtedly a politician, as opposed to the previous favourite Giuliano Amato, who would have been seen as a technocratic Prime Minister. This means Napolitano has opted for a political solution to the post-election stalemate;

• Letta is 47, and Amato is 75. So the choice made by 88-year-old Napolitano addresses the Italian electorate's call for a rejuvenation of the political system. This is significant in the 'old vs young' struggle that has characterised Italian politics recently.

We will provide more detailed analysis once Letta unveils his list of ministers. In light of his appointment as Prime Minister, we would now expect politicians rather than technocrats to grab ministerial posts - although we can't rule out the involvement of a couple of technocrats in the new cabinet. 

However, make no mistake: this move doesn't wipe out the deep divisions among the main political parties, and whatever shape the government takes, it won't be easy for Italy to continue with the reforms that the eurozone demands.
    

And Italy's new President is...the old one! What happens next?

It took the Italian parliament almost three days and six ballots to elect a new President of the Republic. Well, newish. Incumbent Giorgio Napolitano, who will turn 88 in June, eventually caved in to pressure and agreed to serve a second term. This is unprecedented in Italian history and shows how deep the country's political crisis is. Unable to overcome the stalemate and agree on a new President, the main parties have turned to the old one and begged him to stay.

The good news is that, following Napolitano's re-election, Italy looks set to have a new government in place sooner rather than later. The big news is the new government would undoubtedly include Silvio Berlusconi's party.  

What happens next? 

• Napolitano will take his second oath this afternoon. From that moment, he will re-gain the power to dissolve parliament and call new elections.

• Crucially, Napolitano has said he will "clarify the terms" under which he agreed to stay on in his (second) inauguration speech. The Italian media are speculating on at least two conditions. First, a shorter mandate than the seven years set out in the Italian Constitution - otherwise Re Giorgio would be leaving office at 95. Second, and most important, the formation of a national unity government - backed by the centre-left Democratic Party, Mario Monti's centrist group and Silvio Berlusconi's People of Freedom party.

• The markets seem to take the formation of a new government for granted, with Italy's borrowing costs going down this morning. 

• The latest from the Italian media is that Napolitano will hold a swift round of talks and could give someone the mandate to form the new government as early as tomorrow. There are reportedly two clear favourites to lead the new government. One is Giuliano Amato, 75 years old, who already served twice as Italian Prime Minister. The alternative is Enrico Letta, Pier Luigi Bersani's right hand. We would put our money on Amato, especially since not everyone within Letta's own Democratic Party is enthusiastic about him being appointed as Prime Minister.

• The new government is likely to be a mix of politicians and technocrats. It will focus its efforts on bringing home 5-6 key reforms, based on the proposals put forward by the ten 'wise men' earlier this month. We expect the new government to give priority to political, rather than economic reform. Top of the agenda will be changing the electoral system, along with reforming a pretty dysfunctional institutional structure where the two houses of parliament have perfectly equal powers.

• In any case, the new government is unlikely to remain in charge for the entire five-year parliamentary term.

Winners and losers of Italy's presidential election

Silvio Berlusconi: Big winner

Whether you like him or not, Berlusconi's handling of the presidential election was masterful. He avoided 'hostile' candidates being elected (think of former European Commission President Romano Prodi or left-wing Law Professor Stefano Rodotà, Beppe Grillo's man). Any new government will be dependent on his party's support - exactly what Il Cavaliere wanted since the beginning. The centre-left is in disarray, and his centre-right alliance is now ahead in all opinion polls. No surprise Silvio was so radiant when Napolitano's re-election became official on Saturday evening.

Beppe Grillo: Winner

Beppe Grillo also comes out as a winner, although his victory is likely to become more obvious in the longer term. The Five-Star Movement's presidency candidate Rodotà was a high profile one. Yet, Rodotà was ignored by Bersani's Democratic Party - which never really considered backing him without giving any plausible explanation for doing so. Ideal conditions for Grillo to claim "a clever institutional little coup" was materialising. We would expect a surge in popular support for the Five-Star Movement - though maybe not in the immediate future.

Pier Luigi Bersani: Big loser

With a couple of poor strategic decisions, Bersani has pushed his party to the edge of a break-up and lost his left-wing ally SEL. After kissing goodbye what could be his once in a lifetime opportunity to become Italian Prime Minister, he also had to step down as party leader. And his party looks set to be in government with Berlusconi again - an option Bersani firmly opposed. Bersani burst into tears the moment Napolitano was re-elected. Some of that may just be relief at his ordeal being over.

So this is where we are at, but things are moving quickly. Keep following us on Twitter @OpenEurope or @LondonerVince for real time updates from Italy.