ROME – Greece may be the fuse, but is Italy the bomb that will blow up the euro and perhaps the entire European Union? In the weeks since Standard & Poor’s and Moody’s downgraded Italian sovereign debt, and gave it a “negative” outlook, the country has been targeted repeatedly by financial speculators. But the country’s economic and financial fundamentals aren’t so bad; it is the country’s political disarray that is spooking investors and roiling markets.
Prime Minister Silvio Berlusconi’s government has lost the confidence of international investors. Even at home, as every opinion poll shows, the once huge Berlusconi majority has become a minority. For much of the crisis, Berlusconi retained his grip on parliament, but daily it became ever more tenuous, with the balance shifting to other members of his coalition and to the opposition. Despite Berlusconi’s best negotiating efforts (worthy of his iconic role as President of the AC Milan football club), many MPs simply don’t want to be framed as accomplices to the Italian – and therefore European – failure. They insisted that he resign as the price of backing reform efforts to quiet the financial markets.