Mr. Berlusconi failed to reach the majority of 316 votes in the House of Deputies, stopping at 308, while the Final Balance Report was approved thanks to the abstention of the opposition. These are in my opinion, the most likely scenarios.
- Berlusconi, after the meeting with President Napolitano, insists to remit his mandate only after the approval of the Stability Plan agreed with the EU and the ECB. The parliament quickly approves the Plan with some some support from the oppositions;
- Berlusconi resigns but strongly patronizes either the faithful Mr Alfano, PDL party President, or Mr Letta, his Under Secretary, as successors;
- None of the above, widely considered Mr Berlusconi straw men, are be able to elicit the support from the opposition;
- Mr Napolitano then gives an exploratory mandate to Mr Monti (or someone similarly well respected) who draws support from centrists (UDC) and centre-left party (PD). Here we have two possible scenarios:
(a) political stalemate : Berlusconi’s party, together with the Nortern League, opposes anyone not drawn from its ranks, the Monti experiment fails and new elections are called with a Berlusconi caretaker government, unable to implement the Plan. Spreads soar, Italy files for intense ECB/IMF emergency resuscitation aid, bonds price collapse sending huge shocks to banks’ balance sheets and possibly leading to widespread bank runs.
(b) coalition government: in order to gain time and avoid a sharp defeat in the elections, the PDL breaks up with the Northern League an accepts an independent new Prime Minister and a coalition government, in order to implement the measures contained in the EU/ECB letter. New election are be postponed sometimes next year. Spreads fall, although only gradually
Which scenario will materialize will depend on what sort of influence Mr Berlusconi will be able to retain in his own party. The larger his influence the more likely the stalemate scenario (Let Samson die with all the Philistines !)