It’s just about over for Silvio Berlusconi.Multiple news outlets are relaying information from Italy’s President (Napolitano) that Silvio Berlusconi has informed him of his intent to resign after the latest budget is passed.
Stocks are rallying on the news.
The Dow instantly shot up by 50 points.
Earlier in the day, Berlusconi was able to get a budget measure passed by the lower house of Parliament, but he did not get enough votes to signify that he retained a majority of support anymore.
Following that realisation, Berlusconi’s main political rival immediately called for a no-confidence vote, prompting Berlusconi to visit the country’s President (who handles such things) and inform him of resignation plans.
This is something that the rest of Europe — the world, even — has desperately wanted to see for some time.
Italy is both too big to fail and too big to save, and the general consensus is that Italy was paying a Berlusconi premium in the market (for borrowing) due to a general distrust of him, and scepticism that he was capable of achieving reforms.
Furthermore, his continued existence was seen as a hindrance to aid from, say, the ECB, which, if it’s going to aggressively backstop European bonds wouldn’t have wanted to reward Berlusconi.
The real question is: how much does this help in reality? While there might have been some Berlusconi premium on bonds, it’s easy to imagine any benefit being very short-lived, as it dawns on everyone that the country faces some deep structural issues that can’t easily be rectified.