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Italy, Berlusconi and the economy

Commenting on Italian politics is not for the feint hearted. Silvio Berlusconi, the darling of the right and bogeyman of the left, and alleged ‘good-friend of Bush’, is back in the Prime Minister’s office. In the middle of May he gave his first address to the Chamber of Deputies. Italy is faced with huge economic problems. In the context of the EU, Italy’s economy is not insignificant. The problems include a significant budget deficit, insignificant economic growth, the persistent problem if Alitalia and the refuse crisis in Naples. What has Berlusconi promised? Has he changed his old ways?

Berlusconi’s address has been widely seen as one that intended to build common-ground in order to tackle Italy’s many problems. Even although he has a very secure position in both the Senate and the Chamber of Deputies (his alliance took about 47% of the vote), he intends to build bridges to the main opposition group in the Parliament, a centre-left coalition. He claimed to be searching for a ‘transparent dialogue’ across party divisions. He will need to be consistent and stick to his policies, inherited from the previous government, of budgetary constraint and economic and political change. Italy has too many politicians and too many civil servants in national and regional governments. Common-ground is needed because the politicians are divided and the economic problems are serious. Even on the issue of dealing with Alitalia, an airline threatened with bankruptcy, there has been no consensus over the last couple of years. This should not be a difficult issue as market solutions are fairly readily available but in Italy’s tortured politics, it is. Berlusconi is reported as saying that he would not take Alitalia into state-ownership. Berlusconi will look for a market solution. His political problems are real for to achieve economic growth and maintain budget constraint he will have to tackle the expectations of his own (often privileged) supporters and secure the inflow of taxation whilst reducing expenditures. Keeping the political and personal balance is not going to be easy for a man with a record for letting things go their own way.

Berlusconi has started well. He has set the mission statements with economic growth and reform as key elements. Even with this good start however there is an element of showmanship. He is going to be in Naples three times a week until the refuse crises is solved as if his mere presence will lead to a solution. With many ‘Northern League’ ministers in his government this could backfire as the symbolism stikes home. The problem in Naples is not only one of capacity but of deeply embedded political corruption. Berlusconi needs policies and political muscle, not rhetorical gestures. Palermo in Sicily had several years of recurrent crises with respect to refuse collection and disposal before the problem was rooted out. There is no reason to assume that the same will not be true of Naples. Berlusconi’s real test will be whether he can maintain his promises on economic and political reform and revive the Italian economy. To do this he needs to balance diverse elements in the political scene. There is no doubting his entrepreneurial skills, though these have been used in ways that do not always square with good business practices. To maintain his pledges, and keep the political system and its participants focused on rescuing Italy from its economic and political crisis will require a different kind of leadership, perhaps even statesmanship. People can change. Can Berlusconi?