Berlusconi Resigns

From Business Week:

Prime Minister Silvio Berlusconi’s offer to resign leaves Italy struggling to produce a new regime stable enough to implement painful austerity measures in a country that has averaged almost a government a year since World War II.

Berlusconi said today that he favored early elections and that Angelino Alfano, head of his People of Liberty party, might be the candidate. Berlusconi last night said he’d step down as soon as parliament passed cost-cutting steps pledged to European Union allies in a bid to convince investors Italy can curb record borrowing costs. Parliament is due to vote on the measures in the coming weeks.

Italian stocks and bonds fell today on concern that a change in leadership won’t be enough to contain the turmoil in a nation with the euro-region’s second-biggest debt. European officials’ inability to tackle the sovereign crisis led to a surge in Italian bond yields in recent weeks that further frayed Berlusconi’s fractious coalition as top ministers bickered over how to protect the country from the contagion.

“Whoever is in charge, the numbers remain the same and this morning they are even worse,” Simon Smith, chief economist at foreign-exchange broker FXPro Group Ltd., said in a research note. “This Roman road is currently leading to a cliff. Events have moved far faster than the labored political process of the EU can deal with.”

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