Political stage is set for turmoil in Italy

Battle expected between Monti, Berlusconi

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ROME -- For months, he had flirted with the idea of staying out of politics, but in the end, former Prime Minister Silvio Berlusconi just could not resist. His statement on Saturday that he would seek office out of a sense of "responsibility" for his country effectively ended the mandate of the technocratic Prime Minister Mario Monti, who said he would step down after Parliament passed a budget bill later this month.

Mr. Monti's surprise announcement late Saturday raised the prospect of more political uncertainty and market turmoil for Europe's third-largest economy in what is expected to be a gloves-off election campaign. But it also increased the possibility that Mr. Monti might decide to run as a candidate, not only as an apolitical leader open to governing if national elections -- now expected as soon as February -- yield no clear winner.

Three years into Europe's debt crisis, the new developments in Italy underscore the clash between the economically sound and the politically sustainable. While Mr. Monti, an economist and former European commissioner, has reassured investors and helped tamp down Italian borrowing rates, the tax increases and spending cuts passed by his Parliament have eroded lawmakers' standing with voters.

Even if Mr. Monti decides not to run as a political candidate, his decision to step down inevitably sets the stage for a battle that pits the subtly ironic technocrat -- who on Friday attended the premiere of Wagner's "Lohengrin" at La Scala -- against Mr. Berlusconi, who made his announcement to run for office outside the facility where his A.C. Milan soccer team plays.

"The war will be between Monti and Berlusconi," said Massimo Franco, the chief political commentator for Corriere della Sera, an Italian daily newspaper. "The moderate votes are in play, not the leftist ones."

Although Mr. Berlusconi said he would run for office out of a sense of "responsibility," European leaders and market analysts immediately accused him of the opposite. Martin Schulz, the president of the European Parliament, called his decision to return to politics "a threat for Italy and Europe, which need stability," the Italian news agency Ansa reported.

Many investors and European leaders worry that many of Mr. Monti's overhauls -- even ones that have not yet been approved by Parliament -- could be undone by future Italian governments.

In an interview with Il Sole 24 Ore, a financial daily, European Commission President Jose Manuel Barroso said Italy was at risk of being hit by a deeper financial crisis. "The next elections must not serve as a pretext for putting in doubt how indispensable these measures are," Mr. Barroso said. "The relative calm on the markets does not mean we are out of the crisis."

Analysts said Mr. Monti's decision to step down ahead of scheduleBattl was aimed at preventing Mr. Berlusconi from running an election campaign that undermined and criticized Mr. Monti.

Mr. Berlusconi, always attuned to the national mood, even of an electorate that is increasingly weary of him, now looks poised to run on a populist campaign that will criticize Mr. Monti for having foisted unpopular measures on Italians and the single currency for having eroded Italian sovereignty.

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