27 Jun 2008
Il Cavaliere rides again. Italy has chosen the flamboyant 71-year-old and scandal-tainted tycoon despite Berlusconi already serving two previous terms as Italian prime minister. And this time he returns with a fatter margin than ever. The Berlusconi coalition grabbed 47 per cent of the popular vote compared to rival left-wing Walter Veltroni who took just 38 per cent – a thumping victory. “We have,” he told public television after Veltroni conceded defeat, speaking from his villa, “difficult months ahead that will require great strength.”
Indeed. There’s overflowing garbage on the streets of Naples; Italy’s national airline Alitalia is verging on bankruptcy; endemic local corruption and a black market economy still thrives and her all-powerful unions remain dominant as ever. Oh, and throw in the country’s pension crisis (Italy has Europe’s oldest population and one of Europe’s lowest birth rates).
Some might argue Italians had already had their fill of Berlusconi after two previous terms in office. But however distasteful Italy’s liberal
intelligentsia might find Berlusconi – the fake tan, the plastic surgery and hair implants, his tacky, theatrical flair, the embarrassing gaffs, the false accounting and bribery allegations that unwind decades, not to mention the sprawling commercial television and broadcast monopoly which critics allege undermines local and national democracy – he remains a formidably clever man. The one-time vacuum cleaner salesman and cruise ship compere previously boasted only he was fit to re-shape Italy into a modern, efficient, capital markets-based Western European economy that would increasingly owe more to US and UK entrepreneurism than old-style Italian economic rigor mortis and chaotic horse-trading.
But the past tells a different story. Despite two previous terms in office, Berlusconi’s state problems remain as deeply entrenched as ever: a rising Euro punishes her exports; inflation is rising (as it is in other Western countries); Italian wages in real terms are slipping fast; her productivity is suffocated by red tape and bureaucracy and Italy’s bloated and inefficient civil service is in desperate need of change. The
Organisation for Economic Co-operation and Development recently revised down Italy’s growth forecast down to 1.3 percent and many think that figure optimistic. The IMF is even more downbeat: it reckons Italian GDP growth will struggle to climb more than 0.3 percent this year. (Some even suggest that within a decade formerly economically prostrate Romania could overtake Italy in terms of GDP.)
Yet Berlusconi’s election talk – much of it – was of slashing taxes and boosting standards of living. These promises though remain at odds with his simultaneous pledge to take tough decisions. How to explain it all? “No one really understands what’s going on, it’s a very
difficult-to-explain phenomenon,” admits Dr Paola Subacchi, head of the International Economics Program at Chatham House, a leading independent international affairs think-tank. “Berlusconi has this great ability to sell any story. That’s what he did with his first political party, Forza Italia, in 1994. Previously there had been a lot of corruption and people were tired of it. He came up with this very simple message that it was time for new people to be given a chance. He had a good track record with managing a complex and wide-ranging business. And he was obviously a born communicator. Someone born to be on stage. Before him, Italian politics was very boring. A lot of horse trading. But he moved political debate out of the closed doors and into the TV studios. He galvanised things and people; he made it interesting. And he adopted this kind of US presidential style.”
Style over substance?
Style over substance is certainly an easy accusation to lob at Berlusconi but as Subacchi says, Berlusconi got people talking about politics. It’s reflected in the high turnout in general elections. Even if Italians don’t have much faith in Berlusconi to turn their economy around, the April 2008 election saw more than an 80 per cent turn out to vote, a figure many Western politicians will envy. For many Italians, says Tobias Jones, author of the book The Dark Heart of Italy, an acclaimed examination of modern Italy’s cultural and political landscape, Berlusconi’s twinkling, jack-in-a-box appeal is a massive draw. “Many like and admire him,” he wrote recently in the UK’s Daily Mail. “For these Italians, Berlusconi represents everything they would like to be. He frequently boasts about his sexual prowess and conquests and he
often exhibits his wealth in ways which some find vulgar, but many find magnificent. The truth is that his lifestyle, rather than being a
barrier to his political progress as it would in a more puritan country, is actually his greatest asset… It’s very hard to predict what will happen in the next five years but it will certainly be spectacular. Berlusconi…is no shrinking violet and Italians are expecting a white-knuckle ride.”
Part of Berlusconi’s obvious appeal to Italian voters is the inability to act the politician. Witness the notorious breaches of protocol. In 2003 he launched Italy’s six-month leadership of the EU by comparing a heckling German MEP with a Nazi concentration camp guard. When asked about his chances at the election in 2006 in front of a rally at the Colosseum, he described those who wouldn’t vote for him as “retards”. More recently he suggested that magistrates should undergo mental health checks. His failure to act statesman-like is also obvious says Dr Subacchi, in the way he conducts his private life in office. “During the time in his last two stints in office he never used the official prime minister’s residence. He preferred to use his own house, which is even more luxurious. He has this fantastic villa in Sardinia too, where Blair and Putin used to go and visit him. There’s also not a very clear dividing line between his role as prime minster and his business interests. When Michael Bloomberg became mayor of New York City, he gave up control of Bloomberg. Berlusconi would never do that with his interests.”
However, just how closely most Italians understand the arguments and the problems the country faces is another thing entirely says Professor Giorgio Questa of the Cass Business School. “Ninety five per cent of Italians haven’t got a clue about what the government is doing with the economy – and that’s generous. Economic policy is very complicated. It’s the same everywhere in lots of places. How many Americans really understand what the Federal Reserve and the US Treasury are doing? The difference though between the US and Italy is that the US, like England, has a system which guarantees the chance of having a clear majority and a clear mandate to be in power for a long enough time to be effective. Berlusconi has this crude populist appeal, a bit like some Republicans have in the US. When he goes on TV he’s trying to make people happy, but he generally does that by cutting taxes and increasing the national debt. Everyone who understands the situation knows Romano Prodi was able to reduce the public deficit and also reduce tax evasion. It’s a tragedy bad for Italy that Prodi didn’t last longer. But unfortunately he has no charisma; he could not appeal to the people.”
One of the reasons why the Romano Prodi administration fell apart was also, it seems, a determination to tackle some of Italy’s economic problems head on, attempting to root out political sleaze, cutting spending and tackling the painfully stark economic divide between north and south Italy. But Prodi enjoyed only a modest measure of success, forced time and time again to trim and compromise his policies due to his tiny majority and disparate, squabblesome power base. Policies of higher taxes also, unsurprisingly, made him deeply unpopular. Disappointingly for many on the left, Prodi also did little to reverse the laws Berlusconi passed that helped him avoid conviction on corruption charges from Italy’s courts.
Italy’s big divide
Northern Italy has largely adapted to the growing pressure of globalisation while southern Italy, with its chronic unemployment and low salaries, has not. Meanwhile Italy’s black, untaxed economy continues to boom, asa recent Economist report makes blindingly obvious: “To judge by their returns in the same year,” it reported, “Italian lawyers and dentists earned on average less than €50,000; restaurant owners barely €20,000; taxi drivers a pitiful €11,500… In 2005 only half of Italy’s limited companies admitted to making any profits at all. Under and non-invoicing to avoid value-added tax (VAT) are common.” So there are huge problems to overcome. Berlusconi also inherits Italy’s perennial weak productivity and massive public debt, estimated to be close to the world’s highest in absolute terms. However, Berlusconi’s victory and large-ish margin should help. Part of his larger-than-expected majority came in the form of support from coalition partner The Northern League, which doubled its share of the national vote compared to 2006 to eight per cent. But that co-operation will come with a cost. The Northern League, led by Umberto Bossi – a man alleged to have advised the Italian Navy to fire on migrant boat people – is widely viewed as a xenophobic and protectionist organisation representing northern industrial Italy. In the past, The League actively sought separation from its southern and poorer neighbour, an attractive idea for many northerners who feel they unfairly subsidize the south. Given the support Berlusconi received from Bossi’s party, it is likely Bossi will press for a range of anti-immigrant, anti-EU and other protectionist
So realistically, can Berlusconi make a difference this time around? Dr Jonathan Hopkin from the London School of Economics doubts it. “Berlusconi is absolutely not a market liberal, he’s an instinctive monopolist and protectionist so there is not much prospect of serious economic reforms, even though he has a big majority.” The commitment to keep the nearly bankrupt national airline Alitalia Italian going is also baffling says Hopkin – it would be illegal to nationalise it – as are promises of more tax cuts. “There is little scope for tax cuts, but the public finances are in much better shape than he [Berlusconi] left them two years ago, so he could probably finance some of it by simply allowing the deficit to grow back to or beyond the Maastricht parameters, and forgetting about any attempt to reduce the national debt. The business community – or at least large businesses – have a contradictory relationship with Berlusconi. On the one hand he shows no interest in addressing Italy’s competitiveness problems – after all, he only has to compete with the RAI state television, which he will now be running. On the other, business leaders don’t particularly like centre-left governments either, since they are often too tied to the interests of trade unions and the radical left. In my view, Berlusconi stands for continuity in economic policy, and safeguarding the position of the middle classes in the North, not to mention some rather dubious interests in the South.”
Others were also bleak. “If Italy can only really focus on addressing her regional differences and infrastructure concerns then she would do
herself a huge favour,” said one analyst. “She also needs someone who can make really tough decisions and risk being unpopular. That person, frankly, isn’t Berlusconi.” Another cited the hugely over-regulated economy that hinders competitiveness and foreign direct investment. (Spain, in contrast, now attracts almost double the amount of direct investment that Italy attracts.) Despite the huge amount of money channeled into public services, Italian university standards are slipping; her legal system remains inefficient with long delays common
in civil justice cases. And many of her state assets are owned not by central government but by local and regional authorities, making genuine reform contentious and hazardous.
Reasons to be cheerful?
Despite the many obvious concerns about Italy, there are some reasons to be hopeful. Italians generally are not overburdened with crippling
personal debt, unlike consumers in the US and UK. Italy’s banking system is efficient and competitive. Their manufacturing base has
remained reasonably resilient. Italian car giant Fiat, for example, has transformed itself from the strike-ridden and inefficient colossus it
was just five years ago. And despite the high euro, many Italian exporters are enjoying great success. Economist Sean Rickard from The
Cranfield School of Management says Italy’s problems need to be taken in the context of enormous shifts of economic power generally. “The
cliché of Italy being like organized chaos is always there. But Berlusconi has tried to drag Italy into the modern age. Italy isn’t alone. The whole Europe is having to come to terms with a very different world, and Italy in particular has a lot of her industry exposed to lower priced competitors and textiles. My impression of Berlusconi is that, for all his faults, he’s more in line with a Tony Blair or a US president. But one way or other, he has not been able to make an efficient use of her market economics. He’s had two stabs at it. It’s a sad reflection that a country like Italy appears to think that Berlusconi is the sort of man that can save it. His huge advantage is his publicity.” His other advantage is also relatively stability. His comfortable majority means he has a solid five years to rule – this electoral insulation however could also mean he could shirk serious risk-taking if he chooses.
Why is Italy so hard to govern?
Chronic party fragmentation has been a huge issue in the past. Romano Prodi’s own outgoing center-left government contained nine different parties. When this coalition’s smallest partner, the centre-left UDEUR withdrew from the coalition, it was enough to cause the whole government to cave in. However Prodi’s successor, ex–communist Walter Veltroni and Silvio Berlusconi between them, took more than 70 per cent of the vote this time, which meant smaller parties – and crucially, loyalties – were edged out. It was, in pretty much every sense, a crushing victory for Berlusconi and bad news for much of the tangled, unorganised opposition, including communists and environmentalists, imploding under the weight of their contradictions and ideological differences. Twenty parties were kicked away in total. The new Berlusconi coalition now is made up of Partito delle Libertà, the Lega Nord and Movimento per l’Autonomia, the Partito Democratico, Italia dei Valori and, finally, the tiny (and fractious) UDC. Although this motley collection of forces might look unpromising to the outsider, it’s a huge leap forward for Italy. The Italian communist party has been kicked out after representation in parliament since World War II. Italy, finally, is moving toward a two-party system – a revolution indeed. Even the left-leaning daily La Repubblica acknowledges the change: “This is an electoral tsunami that redraws Italy’s political landscape,” it said 24 hours after Berlusconi’s win. Outgoing prime minister Romano Prodi held just a one-seat majority; Berlusconi returns this with a majority of 37. “Now we can govern like major Western democracies, with one major party in power and one major party in opposition…With the extremists gone, we can get to work modernising this country.”
He has his work cut out. A huge problem in the south remains the prevalence of the sprawling mafia networks that grip much of the region from Naples to Sicily. The four main Mafia groups are Cosa Nostra in Sicily, the Camorra in the Campania region, the ’Ndrangheta in Calabria (the name is taken from the Greek word “andragathía” meaning heroism and is pronounced an-dran-get-tah)) and the Sacra Corona Unita in the Puglia region, which all continue to make it hugely difficult to enforce transparent and efficient government. Extortion cash is common and there remain large swathes of these regions where little, if any, national taxes are collected. One of the most deep-rotted Mafiosi is
the Calabrian mob ‘Ndrangheta which has increasingly overtaken the Sicilian Mafia as Italy’s public enemy number one. It’s estimated
‘Ndrangheta has up to 10,000 members and its tentacles extend from global drug-running to trafficking nuclear waste. However, the previous Prodi administration did manage to arrest its 57-year-old alleged leader, Pasquale Candela – known as “The Supreme One” – earlier in 2008 who had been on the run from police since 1990. Tight family ties have made it difficult to successfully clamp down on the ‘Ndrangheta thanks to a network made up of largely rural cells. Whether Berlusconi will have more luck here remains to be seen. But he needs to get to grips with it. The Italian Mafiosi are reckoned to control a business that has a combined turnover of more than €90 billion a year according to a recent report. They still rule supreme.
Behind Berlusoni’s buffoonery…
…is a serious politician with a canny, razor-sharp mind. Born in 1936, Berlusconi was educated at a Catholic boarding school that supplied him with a rigorous education in Greek, Latin and philosophy. His family were upper middle class from Milan. He went onto Milan University to study law. His thesis – contractual obligations for TV advertising slots – gave a clue to his later future career direction and interests. After graduating he rapidly built up a real estate empire, borrowing
money to plough into developments around Milan. Even then critics lleged he had been able to push through lucrative real estate deals
thanks to ties and deals from local politicians. In the 1970’s he created cable television station Telemilano after spying a gap in the
market for a station that would offer light entertainment and game shows. Advertising, newspaper and magazine publishing followed. Despite surviving a long list of corruption allegations, Berlusconi’s aides have not escaped. Trusted confidant Cesare Previti and judge Renato Squillante have both received prison sentences. Berlusconi himself has been saved from any serious guilty charges by the statue of limitations – his own government between 2001-2006 shortened these limits – while also successfully managing to decriminalize the false accounting allegations he was charged with. He’s also an immensely wealthy man. Forbes magazine estimates his personal assets run close to $10 billion. His main company is Media set which controls three commercial TV stations – pulling in around half the total national viewing audience – and leading advertising agency Pubitalia.