UPDATE 3-Rebels pull out of Berlusconi government

* Rebels quit Berlusconi’s government

* Resignation of Fini loyalists underlines political crisis

* Confidence vote expected after budget passed

(Adds analyst comment, details)

By James Mackenzie

ROME, Nov 15 (BestGrowthStock) – The rebel group that has challenged
Italian Prime Minister Silvio Berlusconi pulled out of his
struggling centre-right government on Monday, heightening
prospects of early elections in the coming months.

EU Affairs Minister Andrea Ronchi, Deputy Industry Minister
Adolfo Urso and two undersecretaries loyal to Berlusconi’s rival
Gianfranco Fini handed in their resignations, ratcheting up
pressure on the 74 year-old prime minister.

“We all agree today that we need to move to a new phase in
the Italian centre-right,” Urso, one of the coordinators of
Future and Freedom for Italy (FLI), the new party created by
Fini, said on SkyTG24 television.

The departures will not immediately affect Berlusconi’s
ability to govern but they underline the depth of a drawn-out
political crisis that has absorbed the government’s attention
and energy for months.

“With the withdrawal of Fini’s government members, the
betrayal has begun,” said Welfare Minister Maurizio Sacconi, a
Berlusconi loyalist.

Several possibilities are now open, ranging from a general
election, likely to be held in the spring, to the appointment by
President Giorgio Napolitano of an interim government which
would run business until the next scheduled elections in 2013.

Napolitano is due to meet Fini, who is also speaker of the
lower house of parliament, and Senate speaker Renato Schifani on
Tuesday to work out the complicated parliamentary timetable that
could produce the decisive showdown.

Berlusconi, whose ratings have sunk to their lowest levels
since he won power in 2008, has announced a confidence vote in
parliament after the 2011 budget is passed — something that is
expected by mid-December.

He meets Umberto Bossi, head of his allies in the Northern
League, to discuss tactics later on Monday.

IN THE BALANCE

The future of the government has hung in the balance since
the summer when Berlusconi forced Fini and a group of his
supporters out of the ruling People of Freedom (PDL) party the
two men created in 2008.

Fini, who accuses Berlusconi of running the government like
one of the companies in his business empire, has stepped up his
attacks following the recent uproar over the prime minister’s
dealings with a teenaged Moroccan nightclub dancer.

With Italy’s economy struggling to emerge from its worst
postwar recession and the government’s image battered by
scandals ranging from corruption to waste disposal, Berlusconi
has been unable to shrug off the problems as he has done with
similar controversies in the past.

“I think the main reason he has lost credit and lost support
is for economic reasons,” said James Walston, political science
professor at the American University in Rome.

“It is very clear that his government has not been able to
deal with the recession, the number of businesses that have been
going under, the number of unemployed, it continues to rise.”

The latest troubles have come at a particularly sensitive
moment in which the euro zone debt crisis has picked up in
intensity with renewed worries over Ireland spilling over to
affect other countries including Italy.

Italy, with a public debt equivalent to almost 120 percent
of its gross domestic product, has so far avoided the turmoil
seen in Ireland or Greece but politicians on all sides are
acutely aware of the danger that markets may be unnerved by
prolonged political uncertainty.

Thus far, investors have been reassured by the government’s
drive to contain the public deficit and there has been a general
agreement over the importance of passing the 2011 budget law
next month before coming to any decision over an election.

Opinion polls suggest that Berlusconi would probably return
to power after an election but could lose control of the Senate,
which would greatly hamper his freedom of action and could sow
the seeds of a renewed bout of turmoil further along the line.

UPDATE 3-Rebels pull out of Berlusconi government