While EU assistance falls well short of a full-scale Italian bailout, it would come with tough new conditions, and the demands on Silvio Berlusconi were the beginning of a more intrusive effort by Italy’s eurozone partners to ensure Rome convinces the financial markets it is sincere about fiscal reforms. Talks early on Tuesday between Mr Berlusconi and Northern League coalition partners failed to resolve the deadlock – centred on proposed pension reforms – after inconclusive negotiations the night before.
“The government is at risk”, Umberto Bossi, leader of the fiercely eurosceptic and federalist Northern League, told reporters in Rome. “The situation is difficult, very dangerous. This is a dramatic moment”, he said, warning of possible snap elections.
Mr Berlusconi’s difficulties mirrored tough pre-summit negotiations in other European capitals, where leaders were struggling to finalise the overhaul of the rescue fund and strike a deal with Greek bondholders that would allow them to lower the amount of government bailout aid to Athens.
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