The Italian debt crisis has the potential to make the Greek crisis seem small. It must be reiterated that Italian debt makes Greek debt look laughable. It currently stands at some €1,8 trillion. That’s excluding the purported €175 billion the Italians need to keep their country running until the end of the year.

Silvio Berlusconi is about to face yet another prolific attack on his leadership. The Italian Chamber of Deputies will hold a confidence vote in his government tomorrow. If he loses, he will almost certainly have to resign.

But as usual, he may put up all kinds of resistance to avoid that.

The Berlusconi led government has been in trouble for quite some time already. A writer for the Economist described him as a “harassed driver” with “squabbling passengers” who had one “of the wheels on his rickety vehicle [come] perilously loose yesterday.”

The Italian government was defeated in the chamber on Tuesday night, by a single vote, which saw a plan that would have approved consolidation of 2010 public accounts scrapped.

The Economist writes:

This was triply humiliating. First, it has never happened before, or at least not since the postwar foundation of the Italian republic. Second, neither the finance minister, Giulio Tremonti, nor Mr Berlusconi’s chief ally, Umberto Bossi, the leader of the Northern League, were in the chamber to vote.

Third, as scarcely needs to be said, anything to do with Italy’s public finances is especially sensitive in the midst of a crisis in the euro zone when the government is trying to rein in its deficit and persuade sceptical investors to demand lower rates of interest on its debt.

Throughout the crisis the Berlusconi administration’s most persuasive claim to power has been that it offers the stability needed to guide vitally needed financial measures through the legislature. That argument looks distinctly hollow after yesterday’s defeat.

Mr Tremonti was “at a funeral” while the vote was happening, and Mr Bossi was chatting to journalists.

The current Italian president, Giorgio Napolitano, also has his doubts about how a Berlusconi led administration can possibly get them through the current crisis and whether they’re actually:

Able to operate with the constant cohesion needed to … [provide] adequate solutions to the most urgent problems of the country.

The European Financial Stability Facility only has a lending capacity of 250 billion Euros – that is, it would be virtually impossible to extend the kind of help Greece and other regions are getting to Italy.

Mind you, you know who might have that kind of cash? Silvio Berlusconi.

[Source: Economist]