Silvio Berlusconi yesterday set the tone for his election campaign by saying nobody should care about bond spreads and accusing Prime Minister Mario Monti of being “German-centric”, prompting dismay and warnings against populism from Berlin.
“Who cares about the spread?” the 76-year-old Berlusconi, who is running for office for the sixth time in two decades, said in an interview with Canale 5 television – a part of his media empire.
“The spread is a trick and an invention with which they tried to bring down the majority that ruled this country,” said the three-time prime minister and billionaire, referring to his last government that collapsed in November 2011 following a parliamentary revolt and panic on the markets.
The spread is the differential between Italian and benchmark German 10-year sovereign bonds – a closely watched measure of investor confidence.
The level had widened to nearly 600 points in the dying days of the Berlusconi government and narrowed to less than 300 points early last week amid high confidence over Monti’s reform agenda.
It has widened since Berlusconi’s People of Freedom (PDL) party said on Thursday that it was withdrawing its support for Monti’s government.
Berlusconi then announced he would run for Prime Minister and Monti said he would resign as soon as Parliament approves next year’s budget, bringing forward the likely date for elections to February.
There is growing speculation that Monti will also decide to run in the election although he has so far declined to comment, saying only that he is not considering the option “at this stage”.
The spread was around 340 basis points yesterday, while the stock market rose by 1.51 per cent in afternoon trading – a day after it trailed other European bourses reacting to the weekend of political drama and the re-emergence of Berlusconi.
Polls say the favourite to win is in fact centre-left leader Pier Luigi Bersani, a cigar-chomping former Communist and two-time government minister who spearheaded a liberalisation drive when he was in office.
Analysts say Berlusconi remains a formidable campaigner, however, and could pick up votes from Italians disgruntled with Monti’s austerity.
Yesterday, he accused the Prime Minister – a former high-flying European commissioner and economics professor who is widely respected in Europe – of being “too German-centric”.
Germany immediately hit back, with Foreign Minister Guido Westerwelle saying it was unacceptable for Germany to be used as a target in a “populist election campaign”.
“Neither Germany nor Europe is to blame for the difficulties in Italy. On the contrary, Germany has always been a great help in overcoming the problems,” he said.
Westerwelle also warned that if Italy’s new Government goes back on Monti’s reforms “it would be a dangerous development for Europe”.