Italian Prime Minister Silvio Berlusconi has resigned amid catastrophic levels of debt that potentially endangered the fate of the entire Euro Zone. Many countries are engulfed by exorbitant public debt that has put mere functioning of government in serious questions from Ireland to Greece. There is an exclusively high rate of uncertainty hovering over the minds of people in and around the Euro-Zone.

The biggest question remains whether Berlusconi’s exit brings good fortune to Italy’s economy and unquestionably to world economic growth prospects in future. Now the fate of the Italian economy solely resides on how effectively President Giorgio Napolitano forms new government under the leadership of Mario Monti a former European Commissioner and most widely discussed candidate for the top post!

The parliament has just passed austerity measures to break the country out of the debt death spiral. The package foresees to save 59.8 Billion Euros from a combination of spending cuts and tax increases.

1 percentage point increase in VAT to 21 percent from 20 percent,stalling of public-sector wages till 2014. Special tax on Energy Sector.They also include increasing age of retirement, reforming employment law, privatizing state corporations and the like.

Austerity measures imply planned reduction in state expenditures on services and benefits in an attempt to reduce deficit spending. Austerity measures does not at all represent moves to realign the fiscal system or to provide with long-term prospective reforms that are needed the most to debt laden countries.

Rather short-term focused which might ultimately prove to provide relief on a marginal scale seriously under representing the whole cluster of fiscal turbulence.

Austerity measures basically tend to lower the intensity of ballooning deficit rather than finding out a constructive and effective way of dealing with it in the future.

According to the Daily telegraph “indeed the euro-zone is reaching a point of no return and it’s becoming a disaster for the global economy in an editorial recently. Pundits also claimed that in order to rescue Italy, almost all the funds in the European Financial Stability Facility (EFSF) would be needed. (1 trillion Euros)

According to Organization for Economic Cooperation and Development (OECD) Gross Italian Debt is up more than 110 percent from the last ten years, in the year 2001 it stood at 120 percent of Gross Domestic Product and even in the year 2005 it was 119.9 percent and again it followed a similar trend in the year 2010 when it reached 118 percent of Gross Domestic Product.

Emma Marcegaglia, head of the Italian Employees association, Confindustria said structural reforms demanded by European Central Bank and European Commission are imminent now, and further said reforms are the only thing that can take us out of current situation.

Image courtesy of the Huffington Post

The real threat to Italian Economy according to a few economists is slow growth rate over the last fifteen years. The above figure illustrates that in the course of fifteen years Italian economic growth rate has been less than the rest of Europe.

Putting any economy back to normal conditions requires stable growth rate and stable growth prospects, these two vital ingredients are missing in Italy’s case, so moving forward into an era of economic unease might continue for quite a few years. The hope is that through these measures, the Italian economy grows at faster rate and the burden of debt is lessened in the near future.

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On Saturday November 12 at 9.42 pm CET Italian Prime Minister Silvio Berlusconi has officially resigned.

His resignation arrived just few hours after the Italian parliament’s lower house passed an austerity measures package demanded by European Union and ECB in order to restore confidence in Italy’s economy and face the country’s heavy debt crisis.

Over 17 years, Berlusconi has always been the main character of the political scene in Italy, he was elected four times as prime minister – in 1994, 2001, 2005, and 2008 – and survived to more than 20 trials and accusations, several votes of confidence, sex scandals and conflict of interest.

After failing to win a parliamentary majority on a budget vote four days ago – for the first time since his election in 2008 – , he announced he would have left office right after the passage of the austerity package demanded by EU.

While the political events were getting hotter day by day, the economic crisis of the country kept on worsening especially because of the strong financial speculation of the markets.

Hence, in such a difficult and hard situation Berlusconi seemed to have no choice and had to surrender and eventually step down.

The news of his future resignation was welcomed by all the opposition parties, one part of his government coalition and a large portion of economics and politics experts and specialists.

Today after the austerity package was approved by the parliament lower chamber with 380 votes and the Republic President signed the legislation in the afternoon, the crucial moment arrived.

The official meeting to hand in his resignation to Republic President Giorgio Napolitano was set for 8.30 pm CET but Berlusconi arrived notably late.

Many people gathered in Rome, out of the presidential palace, to witness the last minutes of Berlusconi as prime minister and celebrate his resignation. At his arrival at the crowds started shouting “Buffoon!”, “Shame!”, and “Get out!”.

For about 40 minutes all the country waited for the official news. Journalists from all around the world were there and the attention of the media was totally drawn on this extraordinary event. November 12 was called the “freedom day” by the crowds gathered in Rome as by many people on social network sites happy to see him leaving the scene.

When the news of Berlusconi resignation broke at 9.42 pm CET, the crowds erupted in cheers, waving Italian and European flags, singing, dancing, jumping for joy. Resistance period songs were struck, bottle of champagne open to toast, and also the Handel’s Hallelujah was performed by chorus of professional and non-professional singers and classical musicians.

Silvio Berlusconi stated he won’t run for next elections but he will keep on contributing and collaborating with his political party. He also wants to participate in the new transition government foundation putting members of his party as candidates.

The new government, which will be led by Mario Monti former European commissioner, will be probably made up of technocrats and economics experts who will have to deal with the heavy economic crisis and the huge debt of the country. Tomorrow Sunday 13, Republic President Giorgio Napolitano will announce the complete government coalition.

The resignation of Berlusconi is seen as the end of an era and a new start for Italy and its political scene but the scenario is still unclear and confused. Next weeks and months will tell us what will be the future of a country that is on the brink of precipice.

Photo courtesy of http://www.flickr.com/photos/andresubierna/6241870752/

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