Is Berlusconi’s luck running out?

Apr 6th 2005
From The Economist Global Agenda

Italy’s prime minister, Silvio Berlusconi, has suffered crushing defeats in regional elections, despite his tax cuts and a promise to bring the country’s troops home from Iraq. There is now a strong chance that Mr Berlusconi’s lot will lose a parliamentary election due next year—assuming it does not fall apart in the meantime. If so, America would lose another strong ally in Europe

DEFYING expectations that Italian Catholics would stay away from the polling booths as they mourned the death of Pope John Paul, voters turned out in strength in elections held in 13 of Italy’s 20 regions on Sunday April 3rd and Monday April 4th, to deliver a crushing blow to Silvio Berlusconi. The Italian prime minister’s four-party, conservative coalition, the House of Freedoms, previously controlled eight of the 13 regional governorships up for grabs. But the results, announced on Tuesday, showed it had lost six of these to the centre-left opposition, including stunning defeats in Lazio, the region around Rome, and the southern region of Puglia, both of which had been strongholds of the hard right.

Mr Berlusconi, a billionaire media mogul who owns several of Italy’s main private television stations, was putting a brave face on it all. He has defied his critics to survive crises before—most notably in the various court cases over his past business dealings, which included allegations of involvement in bribing judges. But this week’s election defeat was, as the daily Corriere della Sera put it, “so crushing that it cannot be talked down or excused.”

Mr Berlusconi had hoped that voters would reward him for two recent rounds of cuts in income tax, and perhaps also for his announcement last month that he would bring Italian troops back from Iraq. But the scale of his defeat has plunged his coalition into a crisis from which it will be hard to recover. Assuming it does not collapse in the meantime, Mr Berlusconi’s government is looking increasingly likely to lose next year’s parliamentary elections to the centre-left opposition alliance, led by Romano Prodi—a former prime minister who was until recently president of the European Commission.

Whatever his faults, Mr Berlusconi has brought a degree of stability to Italian government, which, since the restoration of democracy after the second world war, has been prone to weak and unstable coalitions. Having been in power since 2001, he is in fact the longest-serving Italian leader since the 1922-43 dictatorship of Benito Mussolini, some of whose political heirs belong to Mr Berlusconi’s coalition. However, the defeats in the regional elections may make it much harder to hold together his governing block, which is a disparate group of regional and national parties with conflicting aims. The populist Northern League wants more autonomy for the rich north of Italy and backs Mr Berlusconi’s controversial plans to devolve powers to the regions. These are strongly opposed by another coalition partner, the formerly neo-fascist National Alliance, whose support is mainly in the poorer south. The Northern League tends to share the enthusiasm for free-market reforms of Mr Berlusconi’s Forza Italia party, while the former neo-fascists, unsurprisingly, favour strong state intervention.

After his allies suffered heavy defeats in last June’s elections to the European parliament, Mr Berlusconi had hoped his two rounds of income-tax cuts would help him regain popularity. But these cuts were accompanied by sly increases in indirect taxes, leaving Italians feeling no richer. Furthermore, given Italy’s big budget deficit and huge government debts (over 100% of GDP), voters may have realised that any genuine tax cuts would be unaffordable.

In any case, tax cuts would not have much effect unless they were accompanied by an ambitious set of liberalising reforms, to free up Italy’s sclerotic economy. Mr Berlusconi has promised just this, but failed to deliver. Because of resistance from allies, the prime minister has shied away from confrontations with the trade unions and other vested interests who would be provoked by any serious reform programme. Last month, belatedly, he announced a package of measures to improve competitiveness. But this week’s election defeats seem more likely to undermine the reforms’ chances than to spur the governing coalition into passing them. They also increase the risk that the budget deficit will rise still further, if Mr Berlusconi pushes through more tax cuts in an increasingly desperate bid for re-election.

Mr Berlusconi’s decision to send several thousand troops to support George Bush’s war in Iraq has been deeply unpopular among Italians—recent polls suggest that 70% want them pulled out. American troops’ shooting of an Italian intelligence officer in Iraq in March, soon after he had helped to free an Italian hostage, hardened popular opposition to Mr Berlusconi’s policy. But, as with his income-tax cuts, the prime minister seems to have gained nothing from his announcement shortly before the elections that he would start bringing the troops home. This may have been because he first announced that the withdrawal would begin in September, then backtracked the next day, after talking to Mr Bush, saying that the September date was merely a “hope”.

Mr Prodi’s opposition alliance, the Union, is desperate to oust Mr Berlusconi, not least because it fears that he is systematically neutralising rival sources of power and could become, in effect, impossible to remove. He directly or indirectly controls six of the seven main television channels (if you include state-run RAI). He is curbing the freedom of prosecutors. Last month, the Senate approved a constitutional reform that would enhance the powers of the prime minister, weaken those of the president and undermine the independence of the constitutional court—though the reform will need to be endorsed by a referendum.

Until recently, the Union was in a sorry mess, weakened by splits at least as serious as those in Mr Berlusconi’s coalition. But the regional-election victories mean that Mr Prodi, whose previous government collapsed in 1998 after the communists withdrew their support, looks in a strong position to make a comeback. Given the divergence of opinions within his block, however, it is unclear if he would do any better than the current prime minister at curing Italy’s economic malaise.

The return to power of Mr Prodi would have repercussions beyond Italy. As in Spain last year—where voters kicked out José María Aznar and replaced him with José Luis Rodríguez Zapatero—an Atlanticist conservative would be replaced with a Europhile left-winger more likely to share the views of France’s President Jacques Chirac, that the European Union ought to be a counterweight to America, not its staunchest ally.

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