Sparks with Berlin as Berlusconi kicks off campaign
Silvio Berlusconi on Tuesday set the tone for his election campaign 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 which 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 on Tuesday, while the stock market rose by 1.51 percent 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 Berlusconi remains a formidable campaigner, however, and could pick up votes from Italians disgruntled with Monti's austerity.
On Tuesday, 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."
German Chancellor Angela Merkel meanwhile said: "The Italian people will clearly vote to put Italy on a good path."
-- 'No growth': Mario Monti --
Berlusconi also took on Monti over the economy, saying key figures had worsened during his year in power as unemployment is at record highs and the economy is still mired in recession.
He continued saying that Italy's record-high public debt of nearly 2.0 trillion euros ($2.6 trillion), or around 120 percent of gross domestic product, was "not as high as they want to make you think" if you include the value of Italy's vast grey economy.
Monti also gave an interview to Rai public television in which he said that the government had to be "very careful" and "calm" about bond spreads.
In a rare moment of candour on his personal life, he revealed his own grandson had been nicknamed "spread" at his kindergarten and recognised the word as his own name when he heard it on television.
Monti also warned about rising populism ahead of the elections, saying: "There is a tendency to over-simplify things, to present magical solutions."
And he defended his record in government saying: "We have made great progress but at a cost. In the short term, there has not been growth.
"I would appreciate it if someone could explain to me how it would have been possible financially to spare Italy from suffering the same fate as Greece and make it grow at a rapid rate," he said.
Berlusconi also announced that only 10 percent of the party's candidates in elections now expected in February would be chosen from current lawmakers.
Fifty percent of the candidates will come from the business community, 20 percent from local government and 10 percent from the world of culture, he said, without explaining where the remaining 10 percent would come from.
The PDL has been riven by infighting and hit by a series of fraud investigations since Berlusconi stepped down last year and retreated from the political fray before suddenly returning last week to the dismay of several dissident party members.
Berlusconi also said he would be holding talks later on Tuesday with Roberto Maroni, leader of the populist Northern League party, on forming a possible coalition.
© 2012 AFP