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Italy: Berlusconi denies resignation rumors

There was speculation that Italy's Prime Minister Silvio Berlusconi would resign Monday morning after two senior journalists reported he would quit within hours.

Italy berlusconi election 06 03 2011Enlarge
Italian Prime Minister Silvio Berlusconi waits for the arrival of the President of the Swiss Confederation Micheline Calmy-Rey on June 1, 2011 at Palazzo Chigi in Rome. (Vincenzo Pinto/AFP/Getty Images)

There was speculation that Italy's Prime Minister Silvio Berlusconi would resign Monday morning after two senior journalists reported he would quit within hours. The prime minister quickly denied the reports, but the rumor sent Italy's stock soaring.

The speculation started after Il Foglio newspaper claimed Monday that Berlusconi's resignation was imminent, the Financial Times reported.

"It is a question of hours, some say of minutes," wrote Giuliano Ferrara, the Italian paper's editor and a former minister under Berlusconi.

Meanwhile the editor of the right-leaning Libero newspaper, Franco Bechis, claimed over Twitter that the PM had agreed to step down by the end of Monday and invite ally Gianni Letta to lead a new government, reported the Guardian.

More from GlobalPost: Italy comes under bond market pressure as Berlusconi clings to power

Berlusconi denied the report, writing on his Facebook page:

"The rumors of my resignation are baseless."

But the rumor was enough to help the main Italian stock market, the FTSE MIB, recover earlier losses, noted the BBC. At midday, the index was up 1.5 percent. The speculation also boosted government bond markets. Earlier Monday the cost of Italy's borrowing hit its highest rate in 14 years, at 6.67 percent yield on Italian 10-year bonds.The rate sank to 6.53% on the rumors of Berlusconi's resignation, which Reuters called a clear sign of just how much markets would like to see the Italian leader go.

But while European markets gained, Americans stocks slipped on Monday. At midday trading stocks fell, almost 60 points, as interests rates on Italy's borrowing costs rose to its highest level since the country adopted the euro, USA Today reported. These lasting effects are sure to send markets into further turmoil this week, as the question of Berlusconi's resignation hangs in the air.

Analysts tell The New York Times that European countries will remain wary about lending to each other. If interest rates on the billions that Italy is borrowing continue to rise, analysts fear the country won't be able to borrow from open markets and will have to turn to the International Monetary Fund or the European Union.

More from GlobalPost: Italy: Austerity, Berlusconi-style

Berlusconi faces a crucial test Tuesday, when members of Italy's lower house of parliament will vote on public finances.

If deputies reject the budget, parliament cannot go ahead with the austerity measures proposed earlier this year, the Guardian's John Hooper explains.

It would also confirm that Berlusconi no longer commands a majority, the Wall Street Journal points out:

Several once-faithful members of his center-right party have threatened to vote against the government or abstain from voting on Tuesday [...] Over the next few days, Mr. Berlusconi may also face a no-confidence vote, which—if the potential defectors stick to their guns—he could well lose, according to politicians on both sides of the spectrum.

More from GlobalPost: Italy invites IMF to monitor debt progress

http://www.globalpost.com/dispatch/news/regions/europe/italy/111107/italy-berlusconi-denies-resignation-rumors