Rehn under fire over Berlusconi remarks

30.01.13 @ 09:55

  1. By Benjamin Fox
  2. Benjamin email

BRUSSELS - EU economic affairs commissioner Olli Rehn is at the centre of a political row after blaming Italy's former prime minister, Silvio Berlusconi, for the country's financial crisis.

  • Silvio Berlusconi - the European Commission was unusually blunt in its assessment of his handling of the Italian economy (Photo: ec.europa.eu)

In an unusually blunt statement in the European Parliament on Tuesday (29 January), Rehn cited Italy's troubles in autumn 2011 as an example of how market pressure built up on heavily indebted eurozone economies.

He said Berlusconi had made "some promises of fiscal consolidation" as a result of which the European Central Bank entered the bond market "and the situation for a very short while started to improve."

He added that Berlusconi then "decided not to respect the commitments anymore," leading to "a drying out of lending which suffocated economic growth and led to a political dead-end."

Rehn also praised the performance of Berlusconi's successor and rival in upcoming elections, Mario Monti.

"Monti was able to stabilise the situation ... this was clearly an example of the confidence effect," he said.

The commissioner's remarks provoked a furious response from the Italian centre-right.

Renato Brunetta, a member of Berlusconi's government and a former centre-right MEP accused him of "lies" and "defamatory statements." He also called for the European Parliament to carry out an official inquiry into Rehn's behaviour.

Brunetta - who served as Italy's minister of labour between 2008-11 - said that the Berlusconi administration had pushed through budget cuts worth €65 billion as well as plans for a balanced budget by the end of 2013.

Italian industry commissioner, Antonio Tajani, also an ally of Berlusconi, said: "I dissociate myself from what my colleague Olli Rehn said on Italy and I regret it, because it risks making the European Commission appear like it is not [politically] independent."

The commission itself later issued a statement saying Rehn was merely "recounting" events in autumn 2011.

The row comes ahead of parliamentary elections in Italy on February 24/25.

Although EU officials are not allowed to intervene in national politics, Monti, himself a former commissioner, has been widely praised by EU elites for his government's response to the crisis.

Opinion polls indicate the centre-left Democratic party is likely to lead the next government, with Berlusconi's Party of Freedom running between six and nine points behind.

Berlusconi, the three-times Prime Minister was replaced by Monti's technocratic government in November 2011 with the country seemingly on the brink of a massive EU bailout after interest rates on 10 year government bonds reached 6.45 percent.

Bond yields on Italian 10 year papers have since fallen to around 4.2 percent, their lowest level since the start of the financial crisis.

However, Italy remains in recession and anticipates a return to economic growth only in the second half of 2013.