Italy's Premier Resigns

Berlusconi Hands In Resignation, Pledges To Form New Government

(CBS/AP) 
The National Alliance is the coalition's second-largest partner after Berlusconi's own party. There was little chance that the government could have survived if the party's five ministers — including Foreign Minister Gianfranco Fini — had resigned.

Last week, a smaller coalition partner, the Union of Christian Democrats, or UDC, decided to withdraw its three ministers from the Cabinet. The tiny New Italian Socialist Party has also pulled out two lower-level officials.

The political turmoil was triggered by a crushing defeat in the April 3-4 regional elections. Berlusconi's popularity has fallen amid sluggish economic growth and Italy's unpopular military mission in Iraq.

Last year, Italy's economy expanded by 1.2 percent, compared with an average of 2 percent in the entire 12-nation euro zone, and the government is under pressure from the European Union to contain its ballooning deficit.

Berlusconi, a media mogul-turned-politician, passed about $8.6 billion in tax cuts late last year, but the plan almost tore apart his coalition. Many allies insisted the cuts should have been postponed until 2006, saying Italy's huge debt would not allow for them sooner.

A separate plan to further cut taxes by $16.1 billion this year is also controversial: The National Alliance and UDC insist that priority should be given to aiding Italy's underdeveloped south.

The two parties also are unhappy about massive constitutional reform that gives more power to Italy's regions, and which is backed by another government party, the Northern League. The reform is awaiting parliamentary approval.

Opposition parties led by former European Commission president Romano Prodi have been pressing for early elections. Among their complaints are Berlusconi's handling of the economy and his decision to send Italian troops to Iraq following Saddam Hussein's ouster.

Pressure to pull the troops from Iraq mounted recently following the March 4 killing in Baghdad of an Italian intelligence agent who was escorting a released hostage to freedom. The agent was shot by U.S. troops who mistakenly opened fire on his vehicle.