The Italian crisis Addio, Silvio Market panic has erupted as Silvio Berlusconi prepares to step down from government. We assess the impact of his going—first, on Italy’s politics Nov 12th 2011 | ROME | from the print edition
AS IN many an opera, the wounded hero took an unconscionable time to die. But on November 8th Silvio Berlusconi, who had been haemorrhaging support for months, went to see Italy’s president, Giorgio Napolitano, and promised to resign. The final knife-thrust was the loss of his majority in the Chamber of Deputies, the lower house of parliament, in a crucial vote on the re-submitted 2010 public accounts. Even if elections are held soon, Mr Berlusconi says he will not be running. He now feels "liberated”. So does Italy. Mr Berlusconi has governed it for eight and a half of the past ten years, and has probably done more to mould it in his image than anyone since the country’s fascist dictator, Benito Mussolini. For the past 30 months he has clung to power with improbable tenacity, shrugging off scandals that would have felled the leader of almost any other country. And he has still not gone, quite. As he has already told the president, he will leave only once the legislature has approved a package of economic reforms agreed on with the European institutions and intended both to shrink Italy’s government deficit and revive its flagging economy. In this section »Addio, Silvio Rushing for the exits That sinking feeling Reprints Related topics Mario Monti Giulio Tremonti Italy Politics Silvio Berlusconi
This postponement, coming on top of a technical change that demanded more margin on holdings of Italian government bonds, sent the markets into panic, with Italy’s bonds soaring through the 7% level that was the signal for the bail-outs of Greece, Ireland and Portugal. To some extent investors were reacting irrationally. If Mr Berlusconi had gone immediately, it could have blocked the approval in parliament of the very measures they have come to see as a test of Italy’s credibility. The incurable optimist Alarm was also spread by Mr Berlusconi’s initial insistence on a general election as the only way out of the political deadlock, and by his naming of a perceived stooge, Angelino Alfano, the secretary of his People of Freedom (PdL) movement, as his likely successor: the man who, as justice minister, introduced a 2008 law, later ruled unconstitutional, that provided Mr Berlusconi with immunity from prosecution. Not even an agreement by parliamentary business managers to pass the economic reforms by November 14th stemmed the run on Italian debt. Mr Berlusconi had become a problem for two reasons. First, his personal aversion to reform. Though he came into politics 17 years ago depicting himself as a free-market crusader and always called himself a liberal, he did not act like either. His most decisive intervention in the economy came in 2008 when he blocked the sale of Alitalia to Air France, insisting on patriotic grounds that it should remain in Italian hands. With difficulty, he pulled together a consortium of Italian entrepreneurs to take over the ailing flag-carrier and gave it a monopoly on the most profitable route, between Rome and Milan. Scarcely the action of a free-market zealot. Mr Berlusconi’s resistance to structural reform appeared to harden as the country’s problems deepened. He had made himself Italy’s longest-serving post-war leader by purveying unceasing optimism to an electorate naturally inclined to look on the bright side. He was almost physically incapable, it seemed, of telling voters that things were bad and would get worse if they did not make sacrifices. His government was also incapable of agreeing on, and then steering through parliament, the necessary measures. He led a cabinet with no clear economic ideology. Some of his ministers, such as Renato Brunetta, who holds the civil service portfolio, or Giancarlo Galan, at the heritage ministry, are genuine liberals. But his finance minister, Giulio Tremonti, has become increasingly sceptical of modern capitalism. Making things worse, a rebellion in mid-2010 by his former lieutenant, Gianfranco Fini, left the government with a thin and fluctuating majority in the Chamber of Deputies. Nor could it be permanently enlarged. The only party that could have given Mr Berlusconi’s coalition the votes it needed was the Centre Union (UDC), a party of Christian Democrats that formed part of his government from 2001 to 2006. But the UDC’s leader, Pier Ferdinando Casini, had pledged never again to sit in a cabinet presided over by Mr Berlusconi. The challenge for Mr Napolitano will be to find Italy a government that has both broad support and a clear, detailed reform agenda. Even if Mr Berlusconi leaves office in a matter of days, an election could not be held until January. But Mr Napolitano does not have to call an election at all if he can find support for another solution. Some favour a "technocratic” government, such as the one headed by Lamberto Dini which replaced Mr Berlusconi’s first administration in 1995. In this the interior minister was a judge, the defence minister a general, and so on. Mr Napolitano has made it clear that the man he would like as prime minister in such an administration is the former EU commissioner, Mario Monti. On November 9th he gave him a place in parliament as a life senator, which looked like the first step towards inviting him to form a government—perhaps as soon as Monday. Use the interactive "carousel" to browse The Economist's Silvio Berlusconi cover stories
Such an appointment should delight the markets. Mr Monti is a distinguished economist, president of the business-oriented Bocconi University in Milan, and served twice as a European Union commissioner in Brussels. Investors would expect him and his ministers to draft sensible, effective bills. But bills can become law only with the approval of the legislature and, according to James Walston, professor of international relations at the American University of Rome, "If Monti has any sense he will not take the job unless he can count on a big majority in parliament.” The chances of his being able to do so rose significantly as Italy’s sovereign-bond yield soared and Mr Berlusconi’s resistance to a caretaker administration reportedly crumbled. But Mr Berlusconi’s coalition partner, the Northern League, remained implacably hostile to a technocratic government, and many PdL lawmakers were also said to oppose the idea. By November 10th there was even a prospect of Mr Berlusconi’s party splitting on the issue—a bitter blow for the outgoing prime minister, who sees the creation of an all-embracing right-wing party as his greatest political achievement. A German-style grand coalition, led by Mr Monti or a respected elder statesman like the socialist Giuliano Amato, is another possible solution to the Italian conundrum. But the divisions in Italian politics are deep and bitter after the Berlusconi years. The way out being mooted by some in the PdL, as an alternative to elections, is a government of the existing coalition plus the UDC and perhaps one or both of two small parties loosely allied to it, in a so-called "Third Force”. But could such a government carry forward a programme of bold and energetic reform? Mr Tremonti, a tax lawyer by profession, has been a very prudent keeper of the public accounts. By the time Italy was affected by contagion in June, its budget deficit was lower than most in the euro zone. What first spooked the markets, indeed, was a rumour that Mr Tremonti was to be removed by the prime minister. But where Mr Tremonti has failed dismally is in finding ways to stimulate growth. One of Italy’s peculiarities is that, in recent years, the centre-left has done more for the cause of reform than the centre-right. The only concerted programme of liberalisation in recent years was fostered by Pierluigi Bersani, the leader of the Democratic Party, when he was industry minister in Romano Prodi’s last government from 2006 to 2008. And liberalisation—or even just modernisation—is crucial to Italy’s prospects. Same beach, same sea For beyond the immediate political and economic problems lie others that stem from deep within Italian society. These will take much longer to tackle. Mr Berlusconi’s sojourn in government thwarted a renewal, not just in politics, but in the economy and society, after the collapse of Italy’s Christian Democrat-dominated post-war order in the 1990s. He inherited the Christian Democrats’ electorate of small businessmen, small farmers, liberal professionals and self-employed workers, and never told them they had to move on from the world they look back on so fondly: that of early 1960s Italy, the land created by its post-war "economic miracle”. Benvenuto, Monti
If, for example, Italians cannot find a dry cleaner’s open on a Saturday; if they have to pay thousands of euros to a dispensable public notary to buy a house; if they are forced to accept the service laid on by a single, erratic (and doubtless strike-prone) local bus company, then it is because Mr Berlusconi—and the others who have led Italy over the past couple of decades—have left in place a web of entrenched monopolies, vested interests and cartels that stifle competition and diminish competitiveness. Brave attempts have been made to reform pensions and education. The outgoing government has had considerable success in tackling organised crime. But Italy still suffers from deep-seated ills. Social convention keeps too many married women at home, limiting the size of its workforce. Its capitalism is opaque, typified by cronyism, government interference and shareholder pacts. The trade unions are skewed towards the public sector and the protection of mostly older workers in permanent employment. Italy’s cumbersome justice system, in which the average length of a civil suit is nine years, desperately needs an overhaul to reassure investors that contracts will be enforced and dodgy accounting punished. The Italy Mr Berlusconi will hand to his successor ranks 87th in the World Bank’s Ease of Doing Business survey, behind Albania. The bank found it was harder to get an electricity supply than in Sudan. In Transparency International’s latest corruption perceptions index, Italy ranked 67th. Rwanda and several other African countries were cleaner. Till now, Italy’s increasingly geriatric politicians could argue they were responding to a widely shared mistrust of change in a country where change has seldom been for the better. "Per quest’anno non cambiare”, sang Mina in a song from 1963 that is still frequently quoted as offering sage holiday advice. "Stessa spiaggia, stesso mare”: "Don’t change this year. Same beach, same sea.” Italians’ innate traditionalism has, in some respects, served them well. It is what explains their superb cuisine, for example. But it is also the root cause of the mess they are in now. Mr Berlusconi’s promised departure offers them a chance to break with years of stagnation—social, economic and political. It is time to try another beach.
