Luca Cordero di Montezemolo is one of Italy’s best-known businessmen and currently chairman of the luxury sports car maker, Ferrari. The dashing millionaire from the northern region of Piedmont comes from a long line of audacious military leaders. But these days he has been conducting  something of a guerrilla war against the Berlusconi government as he flirts with a political career of his own.

On Monday he stepped his attacks up a notch and openly called for the Prime Minister to resign.

“We are at the point of no return,” said Montezemolo  in an editorial in Left-leaning daily La Repubblica. “There is not a minute to lose. The private savings of Italians, social unity and Italy’s membership in the euro system are all at risk.”

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With a net worth in the hundreds of millions, it is doubtful whether Montezemolo’s savings face as much risk as everyone else’s, but there is increasing concern that the problems in the eurozone’s third-largest economy could lead to the collapse of the whole bloc.

Silvio Berlusconi is now facing renewed pressure to introduce the reforms he promised to European Union leaders in Brussels just days ago, after bond yields on Monday surged to their highest level since the euro was introduced in 1999.

As world leaders are about to gather in the French city of Cannes for this week’s G-20 summit, fears about Italy’s spiralling debt and soaring interest rates seem set to overtake the Prime Minister’s personal reassurances to stimulate growth and help stem the eurozone crisis.

Jittery investors clearly need some convincing. Milan stocks took a battering and yields on Italy’s 10-year bonds jumped to 6.16% with the spread against the German benchmark bond rising well over 400 points.

There was more bad news for the 75-year-old premier on Monday — a spike in inflation and a boom in unemployment. At a time when Berlusconi wants to make it easier to dismiss workers, the jobless rate rose to 8.3% and youth unemployment climbed to a worrying 29.3% — the highest rate since 2004.

Labour Minister Maurizio Sacconi immediately warned Italy could be in for another period of political violence, as tensions rise over reforms, but the opposition reserved its attacks for the premier.

“Italy is in serious danger,” said Pier Luigi Bersani, leader of the main opposition Democratic Party. “And it is totally evident that the government’s promises to the European Union have had no effect on the executive’s poor credibility or its inadequate commitments.”

Mario Draghi,  the outgoing governor of the Bank of Italy who assumes his new post as head of the European Central Bank on Tuesday, will be under pressure to ensure Berlusconi delivers on his reforms and  avoid following Greece, Ireland and Portugal.

But the future of Berlusconi’s proposals are linked very much to his own precarious leadership, which appears to be crumbling from within.

His latest pledge to raise the retirement age and reform employment laws has had no endorsement from his embittered Finance Minister Giulio Tremonti, whose signature was absent from the letter Berlusconi presented to the European Commission, and his irascible coalition partner Umberto Bossi from the Northern League is still wary of the proposed pension reforms.

Berlusconi who is still facing trial on under-age prostitution, corruption and tax fraud charges, has rejected previous calls to resign, repeating on Friday that he would serve out his term until 2013. But there is growing division within the government’s ranks and speculation that the government will fall as early as the new year and forced to call early elections.

James Walston, professor of international relations at the American University in Rome, sees a greater risk.

“The danger is that the government will continue its muddle, not face either Europe or the League by which time we will all be in the middle of the river,” Walston said. “The more hopeful scenario is that Berlusconi will have to demand more votes of confidence and Bossi finally pulls the plug.”

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Peter Fray
Peter Fray
Editor-in-chief
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