Italy’s latest attempt at a stable and sustainable governing coalition–its 55th in the post-war period–crashed and burned Thursday.
After teetering on the edge for days, Prime Minister Romano Prodi’s left-of-center Olive Tree coalition was finally brought down by the communist Refoundation, a small, ideological party that provided the governing coalition with its parliamentary majority, although it is not a member of the coalition.
The issue was pension reform.
Prodi, an economics professor who is frequently described as “owlish,” submitted a 1998 budget draft that trimmed $2.6 billion from Italy’s pension rolls, the most bloated in Western Europe.
After a week of haggling, during which Prodi offered a number of concessions on other issues, Refoundation’s leader Fausto Bertinotti refused to consider any cuts to pension benefits.
In a final appeal to the Chamber of Deputies, Italy’s lower house, Prodi said Thursday that the required deficit reduction to join a European monetary union “is within reach,” and that if Italy failed to achieve it, the fault would be Bertinotti’s.
The communist leader was unmoved, and Prodi, anticipating a no-confidence vote in Parliament, announced that he would tender his resignation to Italian President Oscar Luigi Scalfaro.
The collapse of the Prodi government after 17 months in power could deal a severe setback to Italy’s hopes of gaining charter membership in the European Economic and Monetary Union.
Prodi guided the nation through some of its most significant economic reforms. He is credited with cleaning up the country’s chaotic public finances, halving inflation and bringing Italy’s budget deficit to within sight of the Maastricht target of 3 percent of gross domestic product.
The next move is up to Scalfaro. He could dissolve Parliament and call for new elections as early as Nov. 30. Or he could ask Prodi to seek a new coalition alignment to save the budget package. Until a decision is reached, Prodi will head a caretaker government.
Forza Italia (Go Italy), the main opposition coalition, is in disarray and does not favor early elections. Instead, its leader, Silvio Berlusconi, called for a temporary national unity government.
“The only serious solution is for a grand coalition. It is the most certain way to enter for sure in Europe, for overhauling the economy and for reforms,” said the media tycoon, who is under investigation for corruption.
But the Democratic Party of the Left, which evolved from Italy’s disbanded Communist Party and forms the core of Prodi’s coalition, was cool to that idea.
“The march toward Europe is not a three-month proposition,” said Massimo D’Alema, the Democratic Left leader.
More than 15 percent of Italy’s gross national product is consumed by pension benefits, and reforming the system is seen as a critical step if Italy is to hit the Maastricht inflation target.
Joining the single-currency union has broad popular support in Italy, and Prodi had even convinced the country’s powerful national labor unions to sign on to the pension reforms in order to meet the 1999 deadline.
But the fly in the ointment turned out to be the unreformed communists of Refoundation, which obtained little more than 8 percent of the popular vote in Italy’s last election. Its constituency is mainly retired trade unionists.
“We are voting no and doing it neither willingly nor with a light heart. You have forced us to,” the party’s parliamentary leader, Oliviero Diliberto, told the Chamber of Deputies.
“As regards the budget, we consider it iniquitous, and that is why we are going to say no,” he said.
The collapse underscored a fundamental weakness of Italy’s parliamentary system, which gives disproportionate power to small parties.
