Yesterday, rumour had it that Berlusconi, the joke of the eurozone, Mr ‘bunga bunga’ himself, was to step down. Immediately, the markets rallied with a slight recovery on the FTSE and a 2.4% upturn in Italy. But then the Italian PM took to that well known political platform – Facebook – to announce, ‘Rumours of my resignation are groundless’ and Italian bonds began to heat up again.
This morning, he’s still clinging to power, despite this overwhelming – and global – vote of no confidence. Even his Coalition partner Umberto Bossi wants him out. Brenda Kelly, market analyst at CMC Markets, says: ‘The biggest domino in the debt crisis is now teetering and Italian bond yields appear to have a Berlusconi premium built-in as they hit euro era highs and eye the bail-out territory 7% level.’
Italy is now poised to vote on financial policy and the all-important kicker: should Berlusconi stay or should he go. Whatever the outcome, Italy is in for a rough ride; too big to bail out, if it doesn't fix up fast, the euro itself is in peril.
Meanwhile Greece is attempting to appoint a new prime minister. Not the most over-subscribed of jobs at the moment. Economist and former vice president of the European Central BankLucas Papademos is a possible contender according to the Italian press. Greece's permanent representative at the IMF, Panayiotis Roumeliotis , could also be a dark horse in the running. The appointment is a matter of urgency to ensure that the next £8bn tranche of bail-out funds lands safely.
We’ll keep you posted as these situations develop...