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Italian Poll Verdict

Abdul Ruff - 4/20/2008

A close US ally of NATO but also a fair bastion of Leftists, Italy has voted in a general election on April 3-14 to choose Berlusconi's new conservative People of Freedom (PDL), a party with “in-sourcing” policy, to lead the nation. The anti-immigration Northern League party in Berlusconi's bloc emerged as a surprise winner in Italian poll as 71-year-old Silvio Berlusconi secured a clear majority and streamlined parliament to help him push through tough decisions on Italy's struggling economy in his third term as prime minister. Berlusconi has last resigned in May 2006. After two years in opposition, Berlusconi returned to Rome from northern Italy recently. He will be returning to the prime minister's office even though he did not promise miracles or hint at painless solutions for the economy. For procedural reasons Berlusconi, who has served two terms as prime minister, is unlikely to be appointed prime minister before May.

The billionaire Silvio, believed to be Italy's richest man, is the head of a business empire that spans media, advertising, insurance, food and construction and includes the successful football club AC Milan. With all votes counted after a two-day election, the media magnate's election bloc had a comfortable majority in both houses of parliament after seeing off the challenge of centre-left leader Walter Veltroni. 62.5% of voters had cast their ballots, while in 2006 a final total of more than 80% of the 47 million people eligible cast their votes. Some three million Italians living abroad are also taking part. Berlusconi's margin of victory is comfortable, and allows the prime minister to form a stable cabinet," said UniCredit analyst Marco Vallil.

This was Berlusconi's fifth consecutive national campaign since 1994, when he stepped into politics from his media empire, currently estimated at $9.4 billion. He has fended off challenges to his leadership by conservative allies and survived conflict of interests’ accusations and criminal trials. His main opponent Veltroni, 52, is a former communist who served for seven years as mayor of Rome , before taking over the leadership of the centre-left coalition led by Romano Prodi, after his government collapsed in January. Veltroni chose his new Democratic Party to run alone without the support of the other centre-left parties and that led to victory of Berlusconi's coalition.

LEFTISTS FAIR BADLY

In the lower house, Berlusconi's conservative bloc led by 46 percent of the vote to 39 percent. The country in this moment has turned in a big way to the right and the big loser was the left. Excluded from Veltroni's bloc, the Rainbow Left, made up of communists and greens, fared so badly it did not make the threshold for seats in parliament. The Communists, whose fickle coalition support had helped to doom the center-left government of Romano Prodi, failed to win the minimum percentage needed to enter Parliament. The conservative tide of voters also swept the Communists out of the next legislature — a group Berlusconi loves to hate. Other smaller parties met a similar fate. A drubbing for the far left means Italy will not have a communist or a socialist lawmaker in parliament for the first time in recent memory. Also failing to make the cut were the Socialists, who for decades had been a key force in postwar governments. The radical left leader, Fausto Bertinotti, promptly resigned.

The main contenders for the premiership were centre-right former Prime Minister Silvio Berlusconi and the centre-left former mayor of Rome, Walter Veltroni. With the economy a key election issue, both men have promised modest tax cuts and reductions in bureaucracy. New regulations prevented anyone from taking mobile telephones equipped with cameras into the polling booths to record which way they voted, as "vote buying" has been detected at previous elections.

The early election paved the way for a return to power of the opposition leader and former Prime Minister Silvio Berlusconi, who is at least 10 points ahead in the opinion polls. "This framework is good news: the blackmailing power of smaller parties has been drastically reduced, and Italy is now more aligned to the experience of several other European countries," said UniCredit's Valli.

Italy 's president is expected to ask him to try to form a government by next month or so and each chamber of Parliament must give his government the required vote of confidence — a process that could take a couple of weeks.

IMPACT OF PRODI

The general election was held three years ahead of schedule following the collapse of a left-of-centre coalition government led by Romano Prodi. Berlusconi had insisted during the crisis talks that only early elections could end the political crisis.
The new government will be Italy's 62nd in 63 years. Prodi's centre-left coalition was defeated in the Senate in January - soon after the small centrist Udeur party left the government. Italian President Napolitano then asked the Senate Speaker, Franco Marini, to put together an interim government with a mandate to reform the electoral law that was widely blamed for the current instability. The political crisis was triggered by last month's resignation of centre-left Prime Minister Romano Prodi. President Napolitano dissolved parliament, following unsuccessful talks to form an interim government. Prodi, currently Italy's caretaker PM, lost a Senate confidence vote.

Under the current proportional representation system, smaller parties with only a handful of seats hold the balance of power in parliament. Italy has too many political outfits. Some 158 different parties contested the regional and national polls, including Berlusconi's PDL and Veltroni's recently formed Democratic Party (PD). There are currently 39 parties in the Italian Parliament. Even with only votes cast abroad left to count, the results had given Berlusconi a 101-seat majority in the 630-member lower house and an advantage of 41 seats in the Senate, which has 315 elected and seven lifetime senators. That contrasts with the two-seat Senate majority of the centre-left government under Romano Prodi, who quit in January 20 months into his five-year term.

Prodi's principal success had been to get the budget deficit back under 3% of GDP, as required by European Union rules. But it came at a cost. The outgoing finance minister, Tommaso Padoa-Schioppa, put up tax rates while cracking down on tax evasion—a combination that made the government hugely unpopular, and damaged Veltroni's campaign.

In the ballot for the Chamber of Deputies—the best indication of the overall mood—it won about 9% more votes than the centre-left alliance led by Walter Veltroni. Though 19 years younger than the prime minister-elect, who is now 71, Veltroni was already a seasoned politician when Berlusconi entered political life in 1994. He began his career as a young communist and, for many Italians, remains tainted by his Marxist past. Though he openly modelled himself on America's Barack Obama, his oratory never reached the same inspiring heights. Veltroni did not have time to erase from voters' minds their often painful memories of Mr Prodi's tenure. Wracked by internal dissent, the outgoing government limped from crisis to crisis, the last and most toxically symbolic of which was last December's refuse-collection crisis in Naples and the region of Campania. Unsurprisingly, the People of Freedom scored particularly well there, and Mr Berlusconi has promised to deal with the rubbish issue as his first priority.

Italy Economic ills

Italy is the fourth largest European economy and has one of the highest per capita incomes in Europe. The country's traditional manufacturing industries suffered a downturn during the final years of the twentieth century, but there have recently been some signs that the economy is beginning to recover from its decade-long slump. Italy's economy has been slipping in the face of low productivity and a strong euro, and analysts say young people, pensioners and low-income workers are feeling the pressure. Although Italy faces a massive public debt, both candidates have promised tax cuts and handouts to voters.

The extent of Italy's malaise was made clear only a week before the ballot, when the IMF cut its growth forecast for the country to 0.3% for both 2008 and 2009. That would make Italy's the slowest-growing economy in Europe and among the G8 rich countries. In 2006 it was overtaken by Spain and next year it may fall behind Greece.

The Italian political landscape underwent a seismic shift in the 1990s when the "Clean Hands" operation exposed corruption at the highest levels of politics and big business. Several former prime ministers were implicated and thousands of businessmen and politicians were investigated. In the mid-1990s its GDP per head, at purchasing-power parity, was 20% above the average for the 27 countries in today's European Union. It was richer than Britain and France, and second to Germany among big EU states. Twelve years on, it has fallen below the EU 27 average for the first time.

There is concern over Italy's birth rate - the lowest in Europe - and the economic implications of an ageing population. With the population forecast to fall by nearly a third over the next 50 years, the late Pope, John Paul II, instructed Italians to "rediscover the culture of life and love and... their mission as parents".

There are some reasons for hope, though. Italy's employment performance is good: joblessness is at a 30-year low. Exports have been booming, despite the strong euro. Italy's banks have improved under the spur of competition, and they have mostly avoided the sub-prime debt that is dragging down rivals in Europe.

Following the poll results, Milan's index of leading stocks rose slightly and shares in two companies controlled by Berlusconi - Mediaset and Mondadori -- jumped at the start of trade.

FUTURE PLANS

In his first comments, Berlusconi reminded Italians he planned to keep his campaign promise of holding his first Cabinet meeting in Naples, where residents had been burning garbage clogging the streets. Berlusconi announced his plans to tackle Italy's problems even before he has been formally tapped to form the next government. His campaign pledges included cutting taxes and reducing the big public debt, liberalizing the economy and getting tough on crime. But critics say he failed to carry out many of the pledges made when he was last prime minister from 2001-2006.

Berlusconi quickly laid out his strategy immediately after his election on April 15 for resolving Italy 's crises, from its ailing national airline to garbage in Naples , a day after the media mogul triumphed in parliamentary elections. Bolstered by right-wing allies — an anti-immigrant party and a former neo-fascist grouping — the 71-year-old media magnate emerged from the election with a generous majority in both the Chamber of Deputies and the Senate.

When he was last premier, Berlusconi defied widespread anti-war sentiment in Italy and sent 3,000 troops to Iraq over the protests of thousands of Italians in the streets. The contingent has since been withdrawn. This time he has ruled out sending new troops to Iraq , but his friendship with the U.S. is not in doubt.

Berlusconi said he would immediately deal with the fate of loss-making national airline Alitalia, and resolve a crisis that left thousands of tonnes on the streets of Naples. "The months and years ahead will be difficult and I am preparing a government ready to last five years," Berlusconi told state television in a live phone call.

Berlusconi proposed a bizarre scheme to close Italy's frontiers and open camps for the identification of jobless foreigners. Bossi's party is both anti-immigrant and protectionist. Berlusconi promised the Northern League at least two cabinet seats and is expected to name its Giulio Tremonti as finance/economy minister. Franco Frattini, EU Justice and Security commissioner, is expected to become foreign minister and Gianfranco Fini, his last foreign minister is to head the lower house of parliament.

Indeed, Berlusconi has already done much to remake Italy in his own image. It is more glittery, perhaps, but also less respectful of the rule of law, stubbornly unreformed economically and more distant from European correctness in its public discourse, for instance on issues of sex and race. In the campaign Berlusconi gave out contradictory signals. Some of his rhetoric was liberal on economic issues. He promised spending cuts, lower taxes and public asset sales. But he also spoke as a nationalist.

Foreign policy

Italy was one of the six countries which signed the 1951 Paris Treaty setting Europe off on the path to integration. It has been staunchly at the heart of Europe ever since, although in the early 2000s the government of Silvio Berlusconi adopted a more Eurosceptic stance. Italy was a founding member of the European Community—now the European Union­_ (EU). Italy was admitted to the UN in 1955 and is a member and strong supporter of the NATO, the Organisation for Economic Co-operation and Development (OECD), the General Agreement on Tariffs and Trade/World Trade Organization (GATT/WTO), the Organization for Security and Co-operation in Europe (OSCE), and the Council of Europe.

Italy supports the United Nations and its international security activities. Italy deployed troops in support of UN peacekeeping missions in Somalia, Mozambique, and East Timor and provides support for NATO and UN operations in Bosnia, Kosovo and Albania. Italy deployed over 2,000 troops to Afghanistan in support of Operation Enduring Freedom (OEF) in February 2003. Italy still supports international efforts to reconstruct and stabilize Iraq, but it has withdrawn its military contingent of some 3,200 troops as of November 2006, maintaining only humanitarian workers and other civilian personnel.

Italian prime minister-elect Silvio Berlusconi said he would help the European Union regain some of the influence in international affairs that he said it had lost since he was last in power. Speaking on one of his own television channels after winning Sunday and Monday's election, Berlusconi said the EU needed a "top leadership squad" to make it count in the world. "There is a need to reconstruct a Europe that has a leading role in the Western world that can tackle with determination the problems facing the world," said the conservative media mogul, who is expected to take office next month.

Berlusconi seeks to align Italy more closely to the US, breaking ranks with the country's traditional allies, France and Germany, in his support for the US-led campaign in Iraq. The Europhile Romano Prodi, who succeeded Berlusconi in 2006, pulled the Italian troops out of Iraq and set about restoring good relations with other EU member states.

British Prime Minister Gordon Brown had already invited him to London, and that he had had "a long conversation" with German Chancellor Angela Merkel and spoken with Spanish Prime Minister Jose Luis Rodriguez Zapatero. Seen as a staunch ally of Washington in its "war on terror," Berlusconi said President George W. Bush had invited him to a dinner in the United States, though he did not specify a date.
Outgoing Russian President Vladimir Putin is due to visit Berlusconi, Italy's third richest man and owner of AC Milan soccer club, at his villa in Sardinia on Thursday. In the election campaign, Berlusconi had said he wanted to "intervene" with the European Central Bank and would discuss it with leaders such as France's Nicolas Sarkozy and Germany's Angela Merkel.

In his second term as premier from 2001-2006, Berlusconi was accused of isolating Italy within Europe by concentrating on relations with the United States, Russia and Israel. Romano Prodi, who beat him in the 2006 election, tried to refocus on Europe in his 20 months as premier. But the former European Commission president was forced out of office in January when his centre-left coalition collapsed. Berlusconi famously made the sign of the cuckold behind a Spanish minister's head at a summit photo call, and shocked the European Parliament in July 2003 by likening a German lawmaker to a concentration camp guard.

Berlusconi often blames the euro for the underperformance of the Italian economy, echoing the opinion of many Italians who say their spending power has waned since they gave up the lira. Italian exporters complain that the strength of the euro on foreign exchange markets makes their products expensive abroad. Berlusconi told Italian TV he would set up a commission to assess the budget situation his government would inherit from the centre-left to make sure there were "no surprises."

Berlusconi scored big among Naples voters, results showed. Berlusconi also promised to save Alitalia for Italians — which could doom attempts sell the failing carrier to Air France-KLM. During the campaign, Berlusconi called for Italian investors to come forward. . "I will be in Naples three days a week" to deal with the trash problem”, he said on state radio, and he would do everything necessary so that the flagship company operates and remains at the service of tourism and of the Italian economy"

AN OBSERVATION

Italians awoke on April 15th to find themselves in a country once again dominated by conservatives. The PDL and its allies obtained an unusually solid majority. With the help of a bonus given to the winning party, the pro-Berlusconi camp has a 98-seat majority in the 630-member lower chamber, The centre-right Union of Christian and Centre Democrats (UDC), which refused to join Berlusconi's new movement, won 36 seats. In the upper house, the Senate, the swing in his favour was strong enough to deliver 174 of the 315 elected seats (seven more are filled by life senators). Veltroni and an allied party won 132. The staunch United States ally, Berlusconi has foiled the Communists to some extent.

The outcome of the election offers Italy the prospect of political stability for the next five years, and perhaps beyond. Paradoxically, an electoral system based on proportional representation, which led to Prodi's unwieldy nine-party coalition, has produced something resembling a two-party legislature familiar in America or Britain. Berlusconi has a more cohesive coalition than in the past.


Surrounded for years by questions about his probity and the conflict of interests between his media empire and his political office, Berlusconi has nevertheless been chosen to become prime minister for the third time. He is unlikely to change his ways, or bring Italy out of economic decline. unconvincing in his claim to represent a new kind of politics. Berlusconi's forces will need a solid command of Parliament if they are to make headway in solving long-simmering economic and social problems, including ones that plagued his 2001-2006 government, Italy's longest since the end of World War II.

Italy is also stuck with higher inflation and lower productivity growth than other euro-zone countries and has, as a result, steadily lost competitiveness. The economy is over-reliant on small and medium-sized enterprises in such traditional industries as textiles, shoes, white goods and furniture. These industries are the most exposed to lower-cost competition from China and the rest of Asia. Faster growth would have lured in more foreign direct investment.

Unemployment among youth has run high for years, prices of consumer goods have been sharply rising, inflation is at its highest levels in years, garbage has been piling up in Naples and other southern cities and the sale of airline Alitalia has been foundering. Even in tourism, where Italy has a natural advantage, it has fallen from first- to fifth-most popular destination over the past 30 years. Education is a mess. Privatisation has been pursued more vigorously by centre-left governments. globalisation has made Italy's problems worse.

Berlusconi knows a period of painful political and economic reforms is essential and unavoidable. Much hangs on Berlusconi's economic direction. Berlusconi's record on running Italy's public finances has been questioned by economists and ratings agencies. A decline in Italy's public debt was reversed during his last government, and it is now the third highest in the world in absolute terms.


Italy would remain a close NATO ally and US freindly nation. On April 16th Berlusconi said Europe needed to regain influence in the world, but he dislikes the economic strictures that the EU seeks to impose, whether on euro-zone interest rates, fiscal policy or competition. But what remains in doubt is whether he is truly committed to liberal reform, or even understands that it is incompatible with economic nationalism. His past record in office is not encouraging. Nothing was done to shake up Italy's myriad protected businesses.