April 11, 2006, 10:43 a.m.
It’s the Economy, Silvio
The results of Berlusconi’s unfulfilled, and unlikely, economic reforms.

By Francis X. Rocca

Rome — American observers of Italian politics ought to feel at home today, with election results that strikingly resemble our last two presidential elections. As in the case of Bush vs. Kerry, exit polls have proved worthless, foretelling that Italy's center-left opposition would win parliamentary elections by more than 4 percent. Instead, like Americans on November 8, 2000, Italians awoke this morning to learn that the tally was still too close to call. As I write, the center-left is a mere 0.07 percent ahead in votes for the lower house.

Whatever this may say about the value of opinion surveys or the ideological divisions in the Italian electorate, it is certainly a damning judgment on the record of Prime Minister Silvio Berlusconi.

It is hard to imagine any candidate enjoying greater advantages in a free election. Not only is Berlusconi the richest man in Italy, with a net worth that Forbes has estimated at $12 billion; and not only does he exert direct or indirect control over all the country's major television networks, along with a print media empire; but the prime minister was also fortunate in his political opponents: an ideologically incoherent 13-party coalition made up of social democrats, Christian democrats, unreconstructed Communists, free market liberals, and greens, among others. Nominally in charge of this fractious group is Romano Prodi, an uncharismatic former prime minister with no significant political base of his own, whose previous government collapsed in 1998 for lack of far-left support.

Recent changes in Italian election law also should have benefited Berlusconi's coalition. A return to proportional representation — after more than a decade of allocating most parliamentary seats by the British-style system of first-past-the-post — favored the growth of smaller parties (a total of 74 parties were in the running this year), making the prospect of a variegated center-left government even less plausible. And the innovation of letting Italian citizens abroad elect their own representatives was supposed to favor the center-right, on the theory that emigrants retain conservative views on matters regarding their native land. As it happens, votes from this new constituency may have clinched the opposition's victory in the senate.

International affairs proved no more of a boon to the center-right than international voters did. Berlusconi is one of the world leaders that Americans know best, largely on account of his support for U.S. policy in Iraq, which has earned him prominent photo opportunities with President Bush, an overnight stay in Crawford, and the chance to address a joint session of Congress weeks before he faced reelection at home. Yet the prime minister's largely successful effort to increase Italy's prominence in world affairs, through high-profile alliances with Tony Blair and Vladimir Putin as well as Bush, appears to have left most Italians cold.

On the other hand, there is no evidence that Berlusconi's stand on Iraq cost him votes, even though most Italians have consistently opposed the war. Once he announced last year that Italy would pull out its troops by the end of 2006, foreign policy practically ceased to be an issue in the race.

The overwhelming topic of speeches, debates, and press coverage throughout the campaign was Italy's ailing economy. With growth at barely more than zero, unemployment over 8 percent, and the national debt at 108.5 percent of GDP in 2005, Italians are scared. The manufacturing industries that were the engine of Italy's boom in the 1950s and 1960s, and which are largely responsible for its position today as the world's seventh biggest economy, now face fierce competition from China and other East Asian countries. A rapidly aging nation with one of the lowest fertility rates in the world, Italy urgently needs to reform its pay-as-you-go pension system and rationalize its immigration policies.

Of course, this is not all, or even mostly, the fault of Silvio Berlusconi. But when the self-made tycoon won office in 2001, he raised the almost mythic hope that he could manage Italy as well as he had managed his businesses. He named his coalition the House of Liberties, vowing to free the economy not only from excessive taxation and regulation, but from the grip of labor unions, industry, and professional associations, along with the other guild-like interest groups that have long controlled Italian commerce.

After five continuous years in power, the longest tenure of any government in the 58-year history of the Italian Republic, Berlusconi has few economic achievements to boast of. It is now somewhat easier for businesses to fire employees (a freedom that the center-left has promised to curtail), but the center-right has done little to liberalize such industries as utilities, insurance, and financial services, and long ago abandoned its most ambitious plans for cutting taxes.

Like neighboring France, which yesterday killed a measure that would have given employers a modest degree of freedom in hiring younger workers, Italy remains a nation deeply skeptical of the benefits of economic competition. Even within the Italian center-right, notably in the post-fascist National Alliance party led by Vice Prime Minister Gianfranco Fini, many vocally oppose the "savage liberalization" of markets. But this only makes the need for leadership all the more urgent. It is Berlusconi's unwillingness to offer such leadership, rather than his inability to enact any particular reform, that will stand as his biggest failure.

— Francis X. Rocca is an American writer in Rome and co-author, with Rockwell A. Schnabel, of The Next Superpower?.

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