Tremonti sees instability after Italian vote

Reuters News

2/22/2013 12:10:32 PM - Reuters News

By Gavin Jones

ROME (Reuters) - Italy's national election this weekend will produce a weak, unstable and probably short-lived government, former economy minister Giulio Tremonti said on Friday.

Tremonti, who is running at the head of a small party of his own, said that even if the centre left led by Pier Luigi Bersani confirmed its opinion poll lead and won a majority, it would be too small and fragile to produce an effective administration.

"Italy's economic problems are huge, and you cannot solve huge problems with a small majority," said Tremonti, who served as economy minister under former prime minister Silvio Berlusconi.

The euro zone's third largest economy has posted six consecutive quarters of contraction, its longest recession for 20 years, and its huge public debt, the second highest in the euro zone after Greece's, is continuing to climb.

Tremonti has formed his own party to contest the election, called "Work and Freedom". It is allied with the pro-devolution Northern League for whom he is the official candidate for prime minister.

He said that the outcome many investors would favor, an alliance between the centre left and outgoing technocrat Premier Mario Monti, might get off the ground but ideological and policy differences were too great for it to last long.

"You don't just have to muster a majority after the election, you have to keep that majority and use it to make difficult decisions day after day," he said. "It's impossible that the centre left will be able to do that."

BERLUSCONI SURPRISE?

Tremonti was widely praised for keeping a tight rein on public finances during the global financial crisis from 2008 to 2011, before frictions with Berlusconi sparked the first rise in Italy's bond yields in the summer of 2011.

Those yields then spiraled out of control and led to Berlusconi's downfall at the end of that year, to usher in former European Commissioner Monti at the head of an unelected technocrat administration.

Italy should have gone to the polls after Berlusconi's fall, said Tremonti, a university professor and former tax lawyer who is in favor of much tighter regulation of financial markets.

"Bersani would have won but it would have been a democratic solution," he said. "If we had voted then, (anti-establishment candidate Beppe) Grillo would have got 4 percent, now it looks like he could get close to 20 percent."

Relations are now icy between Tremonti and Berlusconi but he cautioned that his former boss might do better in the elections than polls suggest.

"Centre-right voters are disappointed with Berlusconi, but they still see him as the only way to stop the left and I think many of those who say they won't vote for him will change their minds in the ballot box," he said.

Tremonti has been a fierce critic of Monti and took evident delight in polls suggesting his centrist bloc will come a lowly fourth behind Bersani, Berlusconi and Grillo, whose 5-Star Movement has been making rapid gains.

"Monti thought he could get 40 percent and he is going to get less than 10, markets bet on Monti and they are going to get Grillo," he said.

(Editing by Andrew Roche)