Report From Rome: Berlusconi’s Comeback?
Ah, Italian politics . . . This scene reminds me of my native Serbia: corruption, sleaze, scandals, cushy jobs for the boys, and dramatis personæ that changes but little from one decade to another. There’s also the same resentment at various dictates coming from the German-dominated European Union—of which Italy (unlike Serbia) is a member, but an institution many Italians now see as a hostile foreign entity.
After nine months in power, Italian Prime Minister Mario Monti is in trouble. His non-partisan government of technocrats was effectively appointed on orders from the European Commission last November to sort out the country’s messy finances, which his predecessor Silvio Berlusconi was deemed unable to do. Berlusconi did not put much of a fight—which he could have done—and in retrospect we can see why. Within weeks Monti had to introduce hugely unpopular emergency austerity measures intended to restore market confidence, which included raising taxes by over twenty billion Euros ($25bn), increasing retirement age (which for many civil servants was a cushy 59!), and introducing tough new measures to curb tax evasion, a national sport if there ever was one. The assumption in Rome was that a reciprocal package would be put together in Brussels (with a blessing from Berlin, of course) to allow new liquidity into Italian economy to encourage growth and restore market confidence.
This did not happen. Since last spring, Monti has grown desperate at the failure of the EU—and especially Germany—to do anything meaningful in order to ease the burden of Italy’s debt servicing. Chancellor Angela Merkel did not agree to a package of measures he’d suggested that would reduce Italy’s high borrowing costs by encouraging bailout funds to purchase Italian bonds, let alone allowing the European Central Bank do so. Italy is subsequently stuck with a crushing debt and negative growth (2.5 percent this year). Public disappointment at this failure has resulted in Monti’s popularity collapsing from over 70 percent last fall to just over 30 percent today. The Italians see that there has been no “northern” reward for debt-cutting sacrifices that have pushed the country into an ever-deepening recession.
Italy’s borrowing costs remain stubbornly high: the difference between the yields on Italian bonds and German Bunds (which are considered the safest in the world) still hovers over 400 basis points—roughly the same as under Berlusconi. Let it be noted that each hundred points of this “spread” adds 20 billion Euros to Italy’s annual cost of debt servicing, equivalent to the entire revenue raised by unpopular new housing taxes. Monti pushed 4.5 million Euros ($5.6 billion) in extra spending cuts for 2012 through parliament earlier this month, but the markets have not responded thus far. The financial speculators now eye Italy as a hungry vulcher eyes a faltering calf.
Monti has a reputation of being the most German of Italians when it comes to fiscal responsibility and budgetary prudence. This has not been enough to offer relief. A measure of his despair is that he has appeared untypically rebellious since last June, when he forged a common anti-German front with his Spanish colleague Mariano Rajoy. The partnership—forged at the European Summit—was an effort to reject all EU decisions unless Chancellor Merkel agreed—in principle—that Eurozone bailout funds would be used to lower the borrowing costs of Italy and Spain. He knows all too well that if Spain is allowed to sink, Italy would be next. In an interview with Germany’s Der Spiegel magazine earlier this month, he insisted that Italy wanted support rather than money from Germany, and pointed out (accurately) that Italy had not received a single Euro from Berlin, contrary to German perceptions. Germany was the biggest beneficiary of the Euro, he added, enjoying low interest rates, while Italy’s remained high. As an anonymous Italian official complained last week, “Countries that don’t need low interest rates get them, and those in recession are stuck with high rates.”
Monti’s claim than intra-Eurozone tensions may destroy the common currency are not without foundation. Anti-German and anti-EU sentiment is now rampant in Italy. His firmness has staved off a pending revolt in parliament back home, but unless he gets a juicy plum from Berlin soon he will be in trouble this coming fall. Sergio Romano, a former Italian ambassador and respected commentator, told Reuters that Monti is afraid that “if the markets see Europe divided, argumentative, always reluctant to pursue a clear policy, they will attack the weakest.” “For the moment that is Spain,” he said, “but Italy would be immediately behind.” While visiting Finland in early August, Monti also played his joker from the sleeve, the scary prospect for other Euro zone powers of Berlusconi’s eventual return. “Let me assure you that if the (bond yield) spread in Italy remains at these levels for some time, then you are going to see a non euro-oriented, non fiscal-discipline-oriented government taking power in Italy,” he declared. Everyone knew who he was alluding to.
The threat is well based. Rumors of Berlusconi’s return have been circulating for months, and he has been adding coals to the fire. Il Giornale, which he owns, published an inflammatory banner headline on August 3, "Quarto Reich" (no translation needed) with an unattractive picture of Mrs. Merkel accompanying the diatribe against allegedly self-serving German policies. With a general election due no later than next April, Berlusconi’s latest Facebook post sounds like an election manifesto (translation mine, with apologies to our Editor for possible errors). This remarkably self-serving piece of demagoguery effectively removes all doubt about his intentions:
My entry into politics harks back to 1994. This has helped prevent the left from taking power, and let us bear in mind that in Italy we have a left that is still rooted in the practices of the old communist party. It is a historical achievement of which I am proud.
What motivates me to continue to commit myself is the sense of responsibility to my country and perhaps the resentment that I have not done everything I had wanted.
The entire party [i.e. Berlusconi’s Il Popolo della Libertà, PdL], starting with the parliamentary deputies, is asking me to come back and to take advantage of my popularity during the election campaign. I have not made a decision as yet, but one thing is certain: I am always at the service of my country.
The PdL has loyally supported the Monti government, and this is evident in its giving him 34 votes of confidence in parliament. Nevertheless, this support is not uncritical, it is predicated on the adoption of constitutional reforms and policies that will encourage economic growth. My decision to resign resulted from the desire to allow the formation of a government of technocrats which will be supported by both the majority and the opposition, so as to finally change the structure of the state and make Italy a governable country, like France. Unfortunately, so far this has not been the case.
The suggestion to leave euro has been advanced by some members of my own party, to be sure, as a tactical ploy to counter the German position. But in PdL we all think that exiting euro would be a disaster. For my part, I have only said that intransigence on budgetary discipline and rigor are important but insufficient objectives if you don’t take parallel measures on growth. If this is not done the issue of exiting euro will eventually be inevitable, at least to save the productive strength of our country.
The most noteworthy aspect of this mini-manifesto is that Berlusconi is trying to counter Monti’s claim that his would be “a non Euro-oriented, non fiscal-discipline-oriented” government. Quite the contrary, he is sending a signal to Brussels that HE would save the euro, while at the same time telling his domestic audience that HE alone can do so while ensuring growth-oriented policy solutions (i.e. more money) for Italy. “I’m climbing back into the ring,” he said in an earlier interview. No hint of leaving this “shitty country,” as Berlusconi said he may do last summer. At 75, he is said to be on a diet and jogging regularly to get into shape.
His return would be a disaster for Italy. Berlusconi embodies all that is wrong with this country’s politics. As I wrote here in an article prematurely titled "The End of the Berlusconi Era" last fall, his embarrassing bunga-bunga parties are but a symptom of a deeper malaise. They were not vicious rumors spread by vile reporters, but real-life events that make decent Italians blush. His resulting legal problems have severely curtailed his ability to function as an effective chief executive; but the real problem is that he has been ineffective all along:
Berlusconi’s rise on the ruins of the corrupt old system—managed for decades by the Christian Democrats and their smaller satellites—was based on the twin promise of “clean hands” and managerial efficiency. Being the richest Italian alive seemed a solid credential regarding the latter: he was supposed to be “Italy’s Thatcher.” He was Prime Minister in 1994-1995, then for five full years starting a decade ago (2001-2006), and currently since 2008, making him the longest-serving leader of a G-8 country and second only to Mussolini at the helm of Italy. He has enjoyed comfortable parliamentary majorities and unique media influence—in part thanks to his Mediaset empire—that should have enabled him to enact and apply a bold vision of Italy for the 21st century.
As I wrote then, and as I maintain even more firmly today, Berlusconi is a failure as a political manager and, more significantly, as a national figure. His private peccadilloes (paying prostitutes to call him “amore” is but a detail) and his iffy business practices could have been overlooked had he not left Italy—after almost ten years in office—in no better state than he had found her in 1994. No different than the early 1990s: the economy was as grotesquely over-regulated when he passed prime ministership to Monti. The old system of corrupt government contracts and phony jobs for the insiders was alive and well. The central bureaucratic apparatus is as bloated and inefficient as ever. There was no improvement in productivity under Berlusconi: Italy’s international competitiveness has actually declined over the past decade. Public spending has been outstripping growth for years. Since 2009, government spending has accounted for more than one-half of the GDP. If he comes back there will be no way for the country to bring its finances in order and simultaneously stimulate growth. Personally, Berlusconi embodies (as per ex-PrimeMinister Romano Prodi, right on target for once) “all those who double-park”—that is, the majority of Italians adverse to regulated society.
Yet the old man wants to be back in power. At his age—given his record and his wealth to provide alternative pursuits—this may seem somewhat strange to a normal person. It is indicative of a deeply neurotic personality. This is unsurprising in a politician, yet troubling because his whims matter. Berlusconi has been written off on more than one occasion in the past. His support may be estimated at a mere 15-20 percent now, but this may change rapidly if “the North” does not come to Monti’s rescue. Merkel’s Lutheran austerity offers his best opportunity.
To put it bluntly, il Cavaliere is insane. “There is only me. I am the only one who can save everything,” he assured his supporters a few weeks ago. Monti is not “a normal person like us,” but one of those people who can’t do anything. “Like us” is a joke, considering that Berlusconi’s net worth exceeds $10bn. His wealth would be no impediment, were it not for the fact that he is a proven failure.
Between a “normal person” like Berlusconi and a faceless chief executive like Monti, Italy is stuck between a rock and a hard place. But life goes on, and it feels good to a casual visitor. On all counts, here in Rome—thank God—it remains eminently civilized, whoever is in nominal charge. Berlusconi, Monti, blah… The morning cappuccino is the best in the world, the sky is crystal clear, and the ten-Euro lunch in a non-tourist hole-in-the-wall in Trastevere is a bliss. So pleasing, in fact, that I loath boarding that bus for the airport . . .