By STACY MEICHTRY
MILAN—Former Prime Minister Silvio Berlusconi warned that his conservative party was bleeding voters by supporting unpopular austerity measures, raising the specter that Italy’s biggest party might pull support for the country’s technocrat government before its term’s scheduled end next spring.
In an interview at his villa near Milan, Mr. Berlusconi—who is still the kingmaker of Italy’s biggest political party, the People of Freedom party—criticized the tax increases and labor-market makeover that Prime Minister Mario Monti has adopted to fend off Europe’s debt crisis.
“The day we stop supporting this technical government, we will recover a lot of votes,” the tanned 75- year-old media mogul told The Wall Street Journal.
Ex-Leader Berlusconi, shown in May, criticized austerity measures.
What Mr. Berlusconi thinks matters to Italy and to Europe. Although he has stepped down from his party’s top post, Mr. Berlusconi is still chairman of the movement, which is the main party supporting Mr. Monti’s technocrat government in Parliament.
For months, the former premier has kept a low profile while Mr. Monti rolled out measures intended to reassure investors that Italy is committed to repaying its €1.9 trillion ($2.4 trillion) debt.
Now, however, the resumption of investor flight from Italian debt, coupled with a darkening economic outlook, has emboldened Mr. Berlusconi and other Italian politicians. Domestic discontent is raising the pressure on Mr. Monti, even as he is trying to find new solutions to keeping the euro-zone crisis from washing over Italy. “If we continue on with the policies of Signora Merkel,” Mr. Berlusconi said referring to German Chancellor Angela Merkel, “We will end up in a worsening recessionary spiral. This is really the wrong policy.”
The Italian billionaire, who was pushed out of government in November, praised Mr. Monti’s drive for greater euro-zone integration, echoing the prime minister’s call for the creation of bonds that pool sovereign debt across the monetary union. But he decried Mr. Monti’s tax increases as “exaggerated” and accused his government of “falling behind” on efforts to cut public spending, overhaul the labor market and overhaul Italy’s sluggish justice system.
“We’re willing to maintain our backing as long as the government presents bills to Parliament that don’t go against our agenda and what we consider the interests of the country,” Mr. Berlusconi said, lounging in his salon, clad in double-breasted jacket and open-collared shirt. If Italy were forced out of the euro-zone, export-driven economies like Italy would regain the “many advantages” of having its own currency, namely the freedom to devalue and stoke demand for homemade goods, Mr. Berlusconi added.
The comments mark the first time Mr. Berlusconi has directly and publicly criticized the government after taking a monthslong hiatus from the political spotlight.
The government declined to comment on Mr. Berlusconi’s remarks. But Mr. Monti has defended his policies by noting that tax increases and pension cuts were necessary to balance Italy’s budget in 2013—a commitment that Rome made to European authorities and financial markets when Mr. Berlusconi was in power.
Mr. Berlusconi’s exit from the Italian political scene resulted after several failed efforts to muster political support for pension cuts and labor market overhauls that the European Central Bank, backed by Germany, said were necessary to restore economic growth.
By the time he left power, Mr. Berlusconi was also still embroiled in two criminal trials, including one in which he is charged with allegedly paying an underage girl for sex—a charge he denies. Shortly after his departure, the former premier handed management of his party to a top lieutenant, Angelino Alfano, and said he had no plans to run for office again.
But in the interview, Mr. Berlusconi made it clear that he isn’t yet ceding his perch atop Italy’s political pecking order. In particular, Mr. Berlusconi said he is spearheading key changes at his party, including giving it a new name and recruiting fresh blood ahead of Italy’s next elections.
Those elections are due to take place in April 2013, but there is growing temptation among Italy’s political parties to vote earlier. Polls show that public support is plunging for Mr. Monti’s government and the parties that back him. In May, Mr. Berlusconi’s party had a weak showing at local elections while anti-establishment groups grabbed territory.
In the interview, Mr. Berlusconi criticized the government for watering down its original labor-market bill, aimed at making it easier for companies to hire and fire workers. In one instance, the government has kept one measure that allows judges to decide whether a worker who was fired without so-called “just cause” should be reinstated. “Unless we improve the bill it will become a missed opportunity,” Mr. Berlusconi said.
The government says it is open to amending the legislation before the bill faces a final vote of approval in the lower house of Parliament at the end of the month.
Mr. Berlusconi also reiterated one of his age-old prescriptions for healing the euro zone: a central bank that can act as a lender of last resort—a role outside the ECB’s charter-capable of printing money in “moments of need.”
A version of this article appeared June 21, 2012, on page A8 in the U.S. edition of The Wall Street Journal, with the headline: Berlusconi, Still a Kingmaker, Raises Specter of Early Vote.