Monti’s exit fuels surge in Italian yields in test for EU

Disavowing Ties

Italy faces about two months of campaigning as Berlusconi, 76, seeks to reverse an opinion-poll slide by disavowing his ties to Monti and appealing to an electorate weary of tax increases and recession. Berlusconi’s People of Liberty party had 13.8 percent support in an SWG Institute poll released last week, compared with 30.3 percent for Monti’s biggest remaining backer, the Democratic Party.

Berlusconi, who was sentenced in October to four years in prison for tax fraud, is free pending appeal. In an unrelated case, he is standing trial on charges of abuse of power and engaging a minor in prostitution, allegations he has denied.

“The ability of Silvio Berlusconi to spook investors knows no bounds,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London said in an e-mailed message. “Mr. Berlusconi is not the cause of Italy’s deep-seated and long- standing economic problems, but he epitomizes the dysfunctional nature of Italian politics, with its discredited leaders and unstable governments.”

Primary Victory

Pier Luigi Bersani, head of the Democratic Party, won a primary election this month to head a coalition of center-left parties in general elections. Bersani’s biggest challenge may come from the anti-austerity Five Star Movement of comedian- turned politician Beppe Grillo, which had 19.5 percent support, making it the second-most popular party.

Bersani said in an interview published today by the Wall Street Journal that he would seek greater flexibility in EU budget rules, while confirming he would respect the covenants. Bersani has told voters he plans to ease portions of Monti’s budget-saving pension reform.

Bloomberg News

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