23 Nov 2011
Opera Buffa is the Italian term for comic opera. It is of course a name intended for the stage, but these days many Italians apply it to the successive governments of former prime Minister Silvio Berlusconi, the 75 year-old who has just resigned from his fourth administration. Like the others, this one was filled with controversy, as Berlusconi, Italy’s third-richest man, staggered from one crisis to another. With a national debt amounting to an unsightly €180trn, Italians breathed a sigh of relief when Berlusconi handed his resignation to President Giorgio Napotitano after coming under immense pressure from his own MPs as his centre-right coalition lost its overall parliamentary majority over budget reforms.
Berlusconi became increasingly distracted by mounting legal problems that have accumulated from his business dealings over the last 30 years, and hampered by a collapse in his credibility, the task of saving Italy from a fate similar to that of Greece or Portugal is now expected to fall on its ministers. Unfortunately, most of them have presided over Italy’s steady decline in the last decade. Interestingly, most of the inner circle is composed of lawyers.
Old dog, old tricks
Berlusconi consistently failed to introduce younger talent (especially women) into a government whose average age is nudging retirement. However, the former prime minister was an adroit politician who made much of pointing out how Italy avoided some of the economic disasters that have affected other nations. It has not had a housing bubble, most of its banks are sound, and unemployment sits at around eight percent. Even The Economist, a long-term critic of Berlusconi, acknowledged in an article in June titled, ‘The man who screwed an entire country’: “The budget deficit in 2011 will be four percent of gross domestic product against six percent in France.”
However, adds the magazine − which Berlusconi unsuccessfully sued for libel in 2008 − these numbers are deceptive: “Italy’s economic illness is not the acute sort, but a chronic disease that slowly gnaws away at vitality. When Europe’s economies shrink, Italy’s shrinks more; when they grow, it grows less.” In fact, Italy has the third-poorest figures in the world for GDP growth in the decade to 2010, which was very much on » Berlusconi’s watch. Only basket cases Zimbabwe and Haiti performed worse.
Yet somehow, while failing to grow the economy, Berlusconi managed to acquire the third-highest levels of debt in the western world. Public debt stands at 120 percent of GDP. As for productivity, the benchmark figure of an economy’s competitiveness, it actually fell by five percent in the last decade, taking Italy in a completely different direction from the rest of Europe.
And some of the statistics that Berlusconi never mentioned would normally apply to third-world nations. For instance, less than half of Italy’s womenfolk participate in the workforce. No other western European nation has such low female employment. (Berlusconi did however, follow a practice of promoting pretty but inexperienced young women for the European parliamentary elections.)
A legacy of disdain
It’s not as though Berlusconi’s successive governments lacked good advice. Mario Draghi, former governor of the Bank of Italy, one of the few highly respected government organisations in the country, fired a broadside at the government before leaving to head up the ECB. Problems cited by Draghi included stagnant productivity, excessive red tape, a creaking justice system, dearth of competition in state and private sectors of commerce, a shortage of business champions such as Fiat (revived by Italo-Canadian Sergio Marchionne, reportedly in the teeth of government opposition), and powerful unions who have basically stitched up the labour market at the expense of non-members.
Perhaps the most damaging legacy of Berlusconi’s ten years of power is a deepening nationwide scorn and even distrust of its politicians, known pejoratively as “the caste of Montecitorio” (parliament buildings). Right on cue, in the intense current debate about the depth and breadth of the austerity measures forced on ordinary Italians, its politicians have managed to soften the impact on themselves while cutting welfare and increasing taxes on others.
The times they aren’t a-changing
Indeed, Italy’s parliament may well be the most expensive in the world. According to Antonio Merlo, Economics Professor at Pennsylvania University, the 945 deputies (effectively, members of parliament) and senators cost the nation €1.6bn a year, or €27.50 for every Italian. That’s 5.5 times greater than what America’s Congress costs its citizens on average.
This is a big reason why, as The Economist adds: “Few Europeans despise their politicians as much as Italians do.” By general consent, successive Berlusconi administrations have managed to introduce a few reforms. Eight years ago, for instance, it liberalised labour laws that helped boost employment. The tax burden was reduced – corporate tax rates for example have fallen from 33 percent to 27.5 percent, helping increase tax receipts in a country notorious for its black economy. Critics do, however, argue that lower corporation tax very much suits Berlusconi, who has a stranglehold on the country’s media businesses.
Taken together, these modest reforms don’t reflect well on a man who held power for a decade. Indeed, it’s been the brief spells of government by centre-left parties rather than Berlusconi’s centre-right coalitions that have seen much-needed restructuring of Italy’s ossified institutions. Perhaps the most common accusation against Berlusconi is that he first became a politician in the 1970s to protect his business interests and that not much had changed since. Berlusconi’s successor will be responsible for coordinating a strict regime of austerity measures in a drive to stop Italy’s financial troubles reaching tipping point. »
Italy’s expensive misfits
Worth $7.8bn according to Forbes latest rich-list rankings, Berlusconi came up in politics the old-fashioned Italian way. That is, by working his political connections to the hilt after graduating in law, seemingly the qualification de rigueur for politicians. For instance, his monopoly on Italian commercial TV was greatly assisted by Bettino Craxi, prime minister at the time. In late 1984, the Craxi government passed an emergency decree legalising nationwide transmissions by Berlusconi’s television stations, despite judicial rulings banning them. A subsequent investigation into a hefty bribe to Craxi in an offshore bank account was later dropped under statute of limitations that had been recently shortened (Craxi was later convicted on various corruption charges under the “Clean Hands” campaign).
Today, the Berlusconi business empire extends into newspapers, publishing, cinema, finance, banking, insurance and sport, where among other assets he owns AC Milan Football Club. Berlusconi’s media assets have been extremely helpful in his political career, such as centre-right newspaper Il Giornale – owned and operated by brother Paolo – that lavishes unstinting admiration on him and routinely attacks his enemies.
Although Berlusconi’s supporters claim no criminal case against him has been successful, this is not true. Some charges have stuck but have been beaten by various last-minute law changes, such as that to the statute of limitations. Allegations against him include collusion with the Mafia, tax fraud, bribery of police officers and judges and creative accounting. Berlusconi claims that he is the victim of “a manifest judicial persecution” and says it has cost him €174m in legal bills.
Most recently, a court ruled in September that Fininvest, his main commercial vehicle, must settle a $560m debt to a rival company dating back 20 years. Berlusconi has also maintained close ties with Vladimir Putin, to the concern of other European nations worried about the former Soviet country’s ambitions to extend its economic power through energy. Indeed, last year’s publication of the Wikileaks cables revealed US officials’ concern over the “lavish gifts” and other links between the two men.
Minister of Economy and Finance, Giulio Tremonti, is the government’s intellectual. Aged 64, he’s a professor with a specialist knowledge of fiscal law and an authority on taxation. Recognised as the man who keeps a tight rein on Italy’s purse strings, he often clashed with Berlusconi. Indeed, in September the Berlusconi-controlled newspaper Il Giornale editorialised that Tremonti should resign over his support for the austerity package demanded by Brussels.
However, both men owe each other favours. Tremonti is a close friend of Northern League founder Umberto Bossi, the secessionist party on whose support the coalition depends and is credited with enlisting the league’s support. Like many Italian politicians, Tremonti has switched camps according to circumstances. For instance, he first ran for parliament as a socialist before being elected under the Pact for Italy banner. But soon afterwards he jumped ship to Berlusconi’s centre-right Forza Italia after being offered the finance post in his first cabinet.
Tremonti is now in his third and most testing period as finance minister. Apart from a spring-clean of the tax system, he has failed to institute the long-overdue reforms demanded by the Bank of Italy and businesspeople. He’s written several books including one warning of the “suicidal risks” of the free market and, presciently, in 2008, one called Fear and Hope on the coming crisis in Europe and what to do about it. He will need all that knowledge and more to extricate Italy from its problems.
Minister of Economic Development, 64 year-old Romani, is seen in opposition media as Berlusconi’s placeman to protect his television interests. He entered politics in the late nineties as under-secretary for the economy under the prime minister’s wing after running a television station. At the time he did all he could to block the entry of Rupert Murdoch-controlled Sky television, seen as a threat to Berlusconi’s Mediaset group, by intense lobbying in Brussels. The campaign prompted the Financial Times to write of the government’s “trickery”.
Romani also introduced laws to inhibit viewing of Sky’s lucrative pay-pornography channel, although it was permitted on Lombardia7, a channel he once managed. Romani also authorised Mediaset to take over the high-definition digital channel in August 2010 although the move was in conflict with competition law. Romani is also considered to be behind moves to block video-streaming in Italy by non-Italian channels such as Google. The US Ambassador to Italy at the time, David Thorne, criticised the “Romani law” of 2003 as seemingly being designed “to block and censor web content” in the interests of Mediaset.
Yet another lawyer, Foreign Affairs Minister Franco Frattini, 54, is the technocrat of the Forza Italia-led coalition. A freemason with a quiet manner, he’s also a qualified ski-instructor and racer, which has been useful in dealing with the upheavals of Berlusconi’s various administrations. “If you can manage the fear at the gate before the race, then you can handle any political debacle.”
Like others in the government, he also jumped ship from the socialists to Berlusconi’s centre-right party in the mid-nineties. Frattini served as justice minister in the EC for three years of a five-year term where he was best-known for a campaign against banning children from watching violent video games. But when Berlusconi called, he resigned the job in 2008 to join the new government.
Something of an anomaly in the coalition, Frattini is strongly pro-European and diametrically opposed to the Northern League anti-immigration stance. Indeed, he believes the EU should welcome up to 20 million immigrants from Asia and Africa. At least publicly, he supports the austerity measures, telling reporters there would be “no attempt” to scale back cost-cutting measures. It may be that Frattini is positioning himself for the post-Berlusconi era.
Interior Minister Maroni is aged 55, another lawyer and staunch member of the Northern League whose founder Umberto Bossi says he “doesn’t give a damn about Europe”. Also a long-time stalwart of Berlusconi, he has made his powerbase in Lombardy. Maroni has served variously as minister of labour and welfare and is now in his second stint as interior minister, but without achieving reforms of any note.