By: Dr. Mike Campbell

The embattled Italian Prime Minister, Silvio Berlusconi, has survived numerous sex scandals and legal skirmishes related to his business empire involving allegations of tax evasion, fraud, bribery and even collusion with the Mafia. Mr Berlusconi has claimed to be a victim of judicial persecution and has yet to be convicted of anything – his critics would say this was because he has used his political position to thwart justice and manipulate statute of limitation laws. He has always been a controversial figure within Italy and on the wider, global stage.

However, the sovereign debt crisis facing Italy and the urgent need for the country to adopt credible financial reforms and get them through parliament has proved to be his political undoing. The Italian PM had promised to deliver reforms to appease the markets and ease the cost of borrowing through bond issues. In recent days, the yield on ten-year Italian bonds has broken fresh limits, surpassing the levels which caused Greece, Ireland and Portugal to ask for EU/IMF bailout help. The yield on 10-year bonds hit 6.77% yesterday (the comparable figure for German borrowing is 1.8%).

Berlusconi managed to pass a budget vote after opposition parties abstained, but the price was his resignation. He has publically confirmed that he will step down once the reforms are in place. The news of his departure has been welcomed by the markets which all closed higher. The Euro also rose against the US Dollar on the news and is currently trading at 1.3795 to the Dollar.

Whilst Silvio Berlusconi has been a controversial and divisive figure, the Italian debt crisis is not of his making. His departure may make it easier for politicians to agree to painful reforms, but a debt of €1.75 trillion will not dissipate overnight. The hope for Italy and the wider Eurozone is that credible financial reforms and austerity measures can be agreed for the Eurozone’s third largest economy which will restore confidence to the markets and slash the yield on Italian bonds.

Mr Berlusconi is a billionaire and his fortune is said to place him as the world’s 118th richest person.