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Bankers' Demands. Faced last week with a crisis situation, the government prepared for the excruciating political decisions necessary to meet the bankers' demands. Not only would taxes be increased but, in a nation of wily evaders, a withholding tax would be introduced, thereby increasing the number of known taxpayers from 5 million to an estimated 14 million. Gasoline prices would be raised to $2 per gal. In defiance of Common Market practice, Italy had already imposed severe restrictions on imports.
Rumor's government faltered over a dispute about the timing of a possible relaxation on credit restrictions. The Christian Democrats wanted to hold down credit until tax revenues rose substantially. Their coalition partner, the Socialists, argued that tight credit would strangle small business and spiral unemployment up from its present 3% to possibly 8%.
Underlying the squabble over economics was the major shift in Italy's complex political power balance that resulted from the national referendum on the 3½-year-old divorce law last month (TIME, May 27). Amintore Fanfani, boss of the Christian Democrats and a four-time Premier himself, had turned the referendum into a test of strength. "A vote for divorce is a vote for the Communists," went one Christian Democratic slogan. But when the ballots were counted, Europe's most Catholic country had retained its divorce law by a 3-to-2 vote; and by inference, it had approved the Socialists, and to a lesser extent the Communists, who backed the law.
The divorce referendum vote, as well as another election last weekend in Sardinia in which the left was also favored, was on everyone's mind during last week's discussions of a possible change of government. No new general elections are scheduled for three years, and the Christian Democrats are not likely to seek a special election while they are in retreat. Some Italians insisted last week that perhaps the time had come for the long-discussed "historic compromise" that would allow Communists to join any new coalition. Realistically, however, the Communists still shy away from participation in the government. They fear that this would lead to a political cleavage of the country and damaging protests from the right. The neo-Fascists have been increasingly strident lately. They are generally blamed for a bomb blast at an anti-Fascist rally at Brescia three weeks ago that killed seven people. Said Social Democrat Flavio Orlandi last week: "Our economic crisis is worse than Britain's because in Britain, an authoritarian alternative does not exist. In Italy, an economic crisis on such a scale can become a crisis of the democratic system."