Alfano, Letta, Dudù and the Crash Probability Updated

Dudu’, Berlusconi ‘s dog, may be the next FI #2

Two days ago the Naples court decided that Berlusconi will face a new trial for corruption:  Italian senator De Gregorio was paid 3 million euro as a reward for voting down former PM Prodi. Today, possibly as a reaction, Berlusconi is launching a restyled “Forza Italia” (FI) party. The main change relative to the Partito della Libertà (PdL), is that that Angelino Alfano, Berlusconi’s ex-maverick-turned-opponent, will decay from his role of party secretary (there will be no secretary in FI, only one President). Similarly, the PdL ministers in the Letta government and the party’s “doves” will have little representation in the new hawks-dominated party. While Alfano’s supporters may command enough votes in Parliament to save the Letta government, a PdL split is becoming more likely and the Letta majority may become cracker-thin.

In a previous post, I introduced the “Italian Crash Probability” calculator. This computes the probability that a fall in the Letta government, spurred
by Berlusconi legal problems, will result in new elections with the
old electoral rules, producing a hung Parliament and political
paralysis, with potentially serious consequences for italian interest rates and sovereign solvency.

Updating the probability of a Letta fall in the near future from 50 to 70% as a consequence of these news produces a rise in this
probability from 33 to 46%, see the graph.