JUST ABOUT the last thing Italy needs right now is to find its finance minister, Giulio Tremonti, embroiled in yet another of the many scandals that have troubled the centre-right government of embattled prime minister Silvio Berlusconi.
Even as the Italian economy came under heavy pressure again yesterday, with the infamous spread between Italian and German bonds reaching an 11-year high at 384 points for a 6.26 per cent yield, Mr Tremonti – who has been undermined by a corruption scandal implicating a close former aide – was calling an emergency meeting of the Financial Stability Committee. The committee comprises of the finance ministry, the Bank of Italy, the stock exchange regulatory board and insurance authority ISVAP.
Despite the swift enactment of a €48 million austerity package two weeks ago, the Italian economy continues to be hit by the sort of market turbulence that was a key factor in the recent near-defaults of Portugal, Greece and Ireland.
Yesterday, Milan’s Ftse Mib index lost 2.53 per cent, thus continuing a negative trend that has seen Italy’s blue chip index lose 13 per cent in the last month.
Not for nothing worried Italian president Giorgio Napolitano yesterday had his second meeting in the last week with Bank of Italy governor and European Central Bank governor-elect Mario Draghi.
Furthermore, Mr Berlusconi is today due to address both houses of parliament on the economic situation, initiating a debate that will not, however, be followed by a vote.
And there’s the rub. Many commentators would argue that if anyone should explain the current Italian economic climate, it should be Mr Tremonti, who has long been seen as a steady hand on the Italian tiller and someone who has kept the euro zone’s third largest economy under control, despite Italy’s 120 per cent debt to GDP ratio, second only in the euro zone to the 160 per cent Greek ratio.
Furthermore, for better or for worse, the markets appear to trust Mr Tremonti’s ability to hold a tough budgetary line.
The fact that the prime minister should opt to refer to parliament on the current economic moment is seen by many as an indication both of Mr Tremonti’s isolation at cabinet level and of the deep tensions between him and Mr Berlusconi.
Both government ally the Northern League, a long-time supporter of Mr Tremonti, and the finance minister himself were reportedly furious yesterday at this apparent distancing.
Worse still for Mr Tremonti is that his position appears to have been weakened by the involvement of one of his closest aides, deputy Mario Milanese, in a huge corruption investigation.
Furthermore, at the beginning of last month Mr Tremonti was forced to move out of his central Rome apartment after it emerged it had been made available to him by Mr Milanese, for a €4,000 a month payment, allegedly in cash.
Subsequent media revelations have suggested that the apartment had been paid for by the Edil Ars building society in return for various government contracts.