Budget Dispute Topples Italy’s Government

A small Communist party whose leader reveres Cuban President Fidel Castro and courted Mexican guerrillas on Thursday brought down Italy’s 55th postwar government.

Prime Minister Romano Prodi resigned after his allies in the Communist Refoundation Party refused to tolerate welfare cuts the government says are vital for Italy’s entry into the common European currency.

President Oscar Luigi Scalfaro asked Prodi to stay on as caretaker while the president consults with political leaders on forming a new government. Prodi’s deputy prime minister, Walter Veltroni, said he believed that new national elections would be necessary.

Prodi had staked his government on joining the continent’s currency union, scheduled for 1999. His government even imposed a heavy one-time “Eurotax” to bring Italy’s finances in line.

Prodi’s resignation can only heighten concern among Italy’s European allies that Rome has yet to overcome the instability that has plagued Italian governments for decades. It also highlights the difficulties European governments face in getting their citizens to stomach painful budget cuts to conform to European Union guidelines.

The fall of Prodi’s 17-month-old government ends Italy’s first leftist-dominated government since World War II.

The main component in the coalition was the Democratic Party of the Left, the post-Cold War incarnation of Italy’s old Communist Party, once the largest in the West. The far-left fringe of the party formed the Communist Refoundation Party.

Prodi’s coalition fell short of a majority in the Chamber of Deputies, so it had to rely on Communist Refoundation’s votes--giving the tiny party, which has only 5% of the delegates in the 630-member body, enormous influence. When Refoundation and its leader, Fausto Bertinotti, refused to support the budget, Prodi effectively lost his majority and had no choice but to leave.

“It will have to be said that you, Honorable Bertinotti, knowingly chose to open a long and difficult crisis,” Prodi told Parliament on Thursday.

Prodi’s resignation came after a week of wrangling and parliamentary debate over his 1998 budget law, which sought to trim pensions by $2.6 billion.

Refoundation had sought a promise that pensions not be touched and wanted concessions on health care, job creation and a shorter work week.