Italy's Berlusconi returns to rebellion, calls to quit

ROME Thu Nov 3, 2011 11:47pm GMT

1 of 2. Italy's Prime Minister Silvio Berlusconi arrives at an Euro Zone meeting before a G20 summit of major world economies in Cannes, November 3, 2011. E

Credit: Reuters/Philippe Wojazer

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ROME (Reuters) - Prime Minister Silvio Berlusconi, under heavy pressure from European leaders to push through urgent economic reforms, returns to Italy Friday facing mounting calls to quit and a rebellion within his own centre-right party.

Berlusconi is due to fly back to Rome after a bruising meeting of G20 leaders in Cannes Thursday, at which his European peers urged him to take rapid action to end political uncertainty and stop financial markets hammering Italian bonds.

EU leaders are exasperated by the Berlusconi government's erratic response to the crisis, which may threaten the entire euro zone if Italy does not shore up its finances and regain the confidence of markets.

With doubts over Greece's future in the euro zone already rocking markets, German Chancellor Angela Merkel called for swift reforms in Italy Thursday and French President Nicolas Sarkozy said the focus should be on making sure measures are implemented.

CHORUS OF CALLS TO QUIT

Among several hurdles at home, the 75-year-old prime minister faces a chorus of calls for him to step down. On Thursday, six former parliamentary loyalists called for a new government in a letter.

One of the deputies, Isabella Bertolini, said the rebels could oppose Berlusconi in a parliamentary vote next Tuesday to sign off the 2010 budget.

The vote will not be a confidence motion but it is important for government business and defeat would lay bare its inability to pass legislation.

Berlusconi has so far resisted pressure from groups, ranging from a powerful business lobby to the Catholic Church, for him to step aside and make way for a new government.

He has insisted that the only alternative to him remaining in power would be to hold early elections next spring, a step he says would be irresponsible while the crisis continues in the euro zone's third largest economy.

VOTE OF CONFIDENCE

Berlusconi had wanted to take a new set of reforms aimed at boosting growth and cutting Italy's massive debt to the G20 summit, but he failed to win full support at a cabinet meeting late Wednesday.

Instead of a decree that would have become immediately effective, the meeting merely agreed on a so-called maxi amendment, containing a number of measures to add to a budget bill currently before the Senate.

Berlusconi informed his European partners Thursday that he would call a confidence vote within 15 days on the measures, a government source said.

An official said the amended package included tax breaks for infrastructure investment, simplifying bureaucracy and helping youth employment through apprenticeships.

Italy's government has announced a succession of reforms and budget balancing measures since August, when the European Central Bank intervened in the market to support Italian bonds as they crept closer to unsustainable levels.

But as the crisis has spread, ECB intervention has become less effective and Italian 10-year bond yields are moving towards 7 percent, a level many analysts believe could lead to a "buyers' strike" where investors refuse to buy the paper.

(Editing by Louise Ireland)

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