Il Cavaliere rides again. Italy has chosen the flamboyant 71-year-old
self-made billionaire 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, as
a 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
measures.
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
alleged 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.