The Italian prime minister has been fighting rumours all day that he is to resign, making a shaky start to an already shaky-looking week for Silvio Berlusconi.
Italian government bond yields went up to 6.64% before falling back, a euro-era high, making it more expensive to service debt or borrow fresh money.
Milan’s stock market jumped two percent on Monday afternoon on word that Berlusconi was going. It fell again after he denied he would resign.
“The situation is extremely volatile. Berlusconi is under extreme pressure to resign from the markets and from many members of his own party. There is a rebellion in the ranks, many of them feel that the situation is no longer sustainable and they want him to resign,” said journalist Phillipe Pullella.
Euro zone finance ministers are due to meet tonight to discuss Europe’s financial crisis, but in Italy one of the prime motivations for Berlusconi’s elected party members appears to be staying in power long enough to avoid losing their pension rights. But the interior minister insisted the game was up.
“Either Berlusconi’s party manages to tighten its ranks, putting aside all squabbles – everyday we read of squabbles inside the People of Freedom party, people accusing each other – or we should acknowledge the majority is lost,” said Roberto Maroni on television on Sunday night.
Interestingly the rumours started when two daily Italian newspapers read the last rites over Berlusconi on Monday morning — both papers belonging to the media magnate’s own stable.