EU officials warn Italy not to let politics ruin recovery

EU officials yesterday warned Italy not to let politics ruin recovery prospects and upset debt markets in a week that could signal the end of Erico Letta’s fragile five-month-old government.

Economic commissioner Olli Rehn and commission president José Manuel Barroso threw their weight behind Letta, who also appealed for stability this weekend before a Senate vote on Wednesday on whether Silvio Berlusconi should be expelled from parliament following a conviction for tax fraud.

“I believe it is of paramount importance to keep political stability in the country to ensure a recovery, mainly because the latest data show the economy remains relativity weak, without clearly indicating a return to growth,” Rehn told Italian business daily Il Sole 24 Ore.

Political instability has thwarted attempts to make the economy more competitive and whittle down Italy’s government debt burden, one of the world’s biggest.

Berlusconi’s centre-right allies have threatened to sink the government if Wednesday’s vote goes against him.

Letta’s left-right coalition, which needs the backing of Berlusconi’s People of Freedom party to survive, has bickered since it was formed in April but the infighting has intensified since Berlusconi was sentenced last month.

Barroso said he did not want to interfere with Italy’s internal politics but it was his duty to demand a greater sense of responsibility from political forces.

“Italy needs systemic stability. It’s one of the big countries of the eurozone: when signs of political instability emerge there are repercussions on the markets,” Barroso said. “In this moment being wise is fundamental.”

Letta appealed for political stability on Saturday, warning that a political crisis would push up borrowing costs and throw Italy into chaos.