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Italy's Berlusconi faces key vote amid economy fears Italy's Berlusconi faces key vote amid economy fears
(about 2 hours later)
Italy's PM Silvio Berlusconi is facing a crucial vote on the budget, amid fears that Italy could be the next victim of the eurozone debt crisis.Italy's PM Silvio Berlusconi is facing a crucial vote on the budget, amid fears that Italy could be the next victim of the eurozone debt crisis.
Borrowing costs for Italy's government have soared because of fears it may be unable to repay its huge debts. Mr Berlusconi has survived dozens of confidence votes during his tenure. He denies he plans to resign, but will meet coalition partners after the vote.
On Monday, Mr Berlusconi, who has survived dozens of confidence votes during his tenure, dismissed reports he planned to resign. Italian government borrowing costs soared to a new record of 6.74% on Tuesday because of the crisis.
Meanwhile, European finance ministers are due to meet in Brussels for talks. European Union finance ministers are due to meet in Brussels for talks.
Concerns over Italy are overshadowing developments in Greece, where political leaders are wrangling over the formation of a new unity government to impose austerity measures in return for international loans.Concerns over Italy are overshadowing developments in Greece, where political leaders are wrangling over the formation of a new unity government to impose austerity measures in return for international loans.
Defections? Defections
Italian lawmakers were expected to gather at about 1500 GMT on approving the Italian state financing bill, usually a procedural vote but one which has come sharply into focus amid the current debt crisis and a reported rebellion by some Berlusconi supporters. Italian lawmakers were expected to gather at about 1500 GMT on approving the Italian state financing bill, usually a procedural vote but one which has come sharply into focus amid the current debt crisis.
Several MPs from his party have defected over recent days. Several more are reported to be considering defecting or voting against him, Italian media reports.
While a defiant Mr Berlusconi on Monday dismissed talk of his possible resignation as "baseless", Italian media report that he is to make a decision on his next steps after the result of the budget vote. Mr Berlusconi has remained defiant, insisting that his government has all the support it needs but he held crisis talks with his main coalition partner, the Northern League and representatives from his own party late into the night on Monday. Further talks are expected after the results of Tuesday's vote become clear.
Stock markets across Europe bounced up on the chance of the Italian premier's departure but returned to negative territory at Monday's close. But analysts say Mr Berlusconi may still win Tuesday's vote as the centre-left may abstain, allowing the essential measure to pass.
While Italy's deficit is relatively low, investors are concerned that the combination of Italy's low growth rate and 1.9tn euro ($2.6tn) debt could make it the next to fall in the eurozone debt crisis. Were he to lose, he could either resign immediately or be ordered by President Giorgio Napolitano to call a confidence vote.
Italian 10-year bond yields rose to a euro-era high of 6.67%, with markets viewing Italy's ability to repay its debt as increasingly doubtful. A defiant Mr Berlusconi on Monday dismissed talk of his possible resignation as "baseless".
There is speculation that Mr Berlusconi no longer has a majority in parliament, after reports that some MPs from his government have defected.
Mr Berlusconi has remained defiant, insisting that his government has all the support it needs.
"I don't understand how rumours of my resignation are circulating," Mr Berlusconi was quoted as saying by Libero newspaper."I don't understand how rumours of my resignation are circulating," Mr Berlusconi was quoted as saying by Libero newspaper.
But if Mr Berlusconi were to lose the budget vote then it is hard to see how he could continue in power for long, says the BBC's Alan Johnston in Rome.But if Mr Berlusconi were to lose the budget vote then it is hard to see how he could continue in power for long, says the BBC's Alan Johnston in Rome.
Our correspondent says it is certainly worth remembering that Mr Berlusconi is a master deal-maker and political infighter, having survived more than 50 confidence motions in the past.Our correspondent says it is certainly worth remembering that Mr Berlusconi is a master deal-maker and political infighter, having survived more than 50 confidence motions in the past.
But this crisis is different as it goes beyond Italian politics - it is instead linked to the international money markets, which have lost faith in Mr Berlusconi's ability to fix Italy's economy, our correspondent says.But this crisis is different as it goes beyond Italian politics - it is instead linked to the international money markets, which have lost faith in Mr Berlusconi's ability to fix Italy's economy, our correspondent says.
The markets are now forcing this country to pay interest rates that could eventually ruin it, which means the pressure on Mr Berlusconi is extraordinary, he adds.The markets are now forcing this country to pay interest rates that could eventually ruin it, which means the pressure on Mr Berlusconi is extraordinary, he adds.
While Italy's deficit is relatively low, investors are concerned that the combination of Italy's low growth rate and 1.9tn euro ($2.6tn) debt could make it the next to fall in the eurozone debt crisis.
Shortly after opening on Tuesday, Italian 10-year bond yields rose to a euro-era high of 6.74%.
This is its highest level since the euro was established in 1999 and close to the 7% threshold which many analysts believe could lead to a so-called "buyers' strike" where investors take fright and refuse to buy. This was interest rate level at which Ireland and Portugal were forced to accept bailouts.
Approval rating drops
Mr Berlusconi has been the dominant figure in Italian politics for the best part of two decades, but lately his approval rating has hit a record low of 22%.Mr Berlusconi has been the dominant figure in Italian politics for the best part of two decades, but lately his approval rating has hit a record low of 22%.
Notwithstanding the effects of the debt crisis, the multi-billionaire leader is currently a defendant in three trials for bribery, tax fraud, abuse of power and paying for sex with a 17-year-old girl.Notwithstanding the effects of the debt crisis, the multi-billionaire leader is currently a defendant in three trials for bribery, tax fraud, abuse of power and paying for sex with a 17-year-old girl.
Debt problems
On Monday, finance ministers from the eurozone met in Brussels to push ahead with a deal put together late last month.On Monday, finance ministers from the eurozone met in Brussels to push ahead with a deal put together late last month.
After their meeting they called on the new government of Greece to approve in writing the terms of the international bailout in exchange for the release of the next tranche of funds.After their meeting they called on the new government of Greece to approve in writing the terms of the international bailout in exchange for the release of the next tranche of funds.
Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is miniscule. Glossary in full		 Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is miniscule. Glossary in full
They also said they welcomed the monitoring of Italy to reassure the markets, and said they were seeking further clarification of when it would pass the economic reforms it has promised.They also said they welcomed the monitoring of Italy to reassure the markets, and said they were seeking further clarification of when it would pass the economic reforms it has promised.
The European Union's Economic Affairs Commissioner Olli Rehn said he wanted answers from Italy by the end of the week.The European Union's Economic Affairs Commissioner Olli Rehn said he wanted answers from Italy by the end of the week.
"It is essential now that Italy will stick to its fiscal targets, ensure their implementation and intensify the structural reforms that can boost growth," he said on Monday. "It is essential now that Italy will stick to its fiscal targets, ensure their implementation and intensify the structural reforms that can boost growth," he said.
On Tuesday, finance ministers from all 27 EU countries will meet.
However, the BBC's Europe correspondent, Chris Morris, understands there will be no agreement on details of the expanded European Financial Stability Facility (EFSF) bailout fund.
Leaders have agreed in principle to boost the EFSF from its current 440bn euros (£375bn) to 1 trillion euros, in order to tackle debt problems in Italy and Spain.
Are you in Italy? Are you concerned about the effect the eurozone crisis is having on Italy? How is the Italian government handling the situation? Does Silvio Berlusconi have your support? Send us your comments using the form below:Are you in Italy? Are you concerned about the effect the eurozone crisis is having on Italy? How is the Italian government handling the situation? Does Silvio Berlusconi have your support? Send us your comments using the form below: