As early 2013 election approaches Italy’s transformation under Monti will be tested

Berlusconi’s retreat marks a watershed for Italy

Silvio Berlusconi announced on October 24th that he would not stand again to be prime minister, indicating that though his political career is not at an end (he remains president of the party he created, the Popolo della Liberta (PDL)), his dominance of the Italian political scene over the 18-year period since 1994 has come to an end. A primary election is to be held for the PDL’s prime minister candidate for the general election due by April 2013, on December 16th, but the only candidate at present is Berlusconi’s Sicilian former protégé, Angelino Alfano, who is now insisting on taking an independent line. Even if Berlusconi were to change his mind and try to run again as prime minister it is unlikely that he will get very far.

For those who believe that a key criterion for a healthy democracy is the impartiality of the rule of law for all citizens including the most powerful, Berlusconi has exerted a baleful influence on a whole generation. He has been sentenced to prison terms for false accounting, bribery and, recently, for tax evasion, although the lengthy process of appeal combined with the statute of limitations has prevented him from ever having to go to prison, and will probably continued to do so. However, despite this, Berlusconi was able to claim legitimacy because he was elected in free elections, albeit helped by his control of much of the media. He convinced many Italians that he was providing a service to democracy by building a right-of-centre pole of a bipolar system of alternative governments, which gave the electorate a choice. Such a choice had effectively not existed up to the fall of the Berlin Wall, because the largest opposition party, the Communist Party of Italy, was unacceptable to Italy’s NATO allies, especially the US, and was therefore also resisted by all other parties including those on the left of centre. Thus the largest party in every government from 1948 to 1991 was Christian Democracy (Democrazia Cristiana).  In 1992 Christian Democracy collapsed due to a cascade of bribery investigations led by the Milan pool of magistrates (Clean Hands, Mani Pulite) and government was put in the hands of a mix of members of parliament and so called tecnici, people with experience of public life but not elected to parliament (although accountable to parliament). The governments were supported by majorities in parliament, where the main party surviving the corruption prosecutions was now the former Communist Party under a succession of different names.  Italy was then moving towards putting the former Communists into power and ironically there was in 1992-93 no credible opposition on the centre-right. So again it seemed that Italian voters would not be given a real choice in the forthcoming general election. In 1994, Silvio Berlusconi, the richest man in Italy who had built his business empire including three national TV stations by his close ties with the former now discredited politicians, dramatically stepped in to fill the gap and for the first time Italian voters had a genuine choice of alternative governments. If Berlusconi’s programme involved a crackdown on the powers of the judiciary rather than respect for due process, that was the programme which in 1994 and again in 2000 and 2008 a majority of Italians voted for.

Other countries have their own problems. President Chirac was being investigated by the judiciary for having allegedly received bribes when mayor of Paris, but neither he no any other leading politician in the EU has been in such open conflict with the forces of the law, as Berlusconi has in Italy over the last 18 years.

Transparency International put Italy 69th in its Corruption Perceptions Index in 2011 and the World Bank’s Indicator of Ease of Doing Business puts it at 87th in 2012. Although these figures are in the middle of the world leagues, they are near the bottom of those for the EU, including its new member states.  Intuition would suggest that there would be a connection between having had for long periods over the last 18 years a prime minister whose personal behavior suggests he sees nothing wrong with corruption and who has epitomized links between Italian business and government which have made market entry by foreign companies unable or unwilling to build up such links much more difficult

Nevertheless, there is little evidence to show that these perceptions would necessarily have been much better without Berlusconi. They reflect structural problems which will not go away because Berlusconi goes away. The fact that Berlusconi was elected again and again  (though with little chance of another electoral victory) suggests that many Italians have a high degree of tolerance to corruption and law-breaking.

A stocktaking of Italy after 18 years of Berlusconi reveals a mixed picture, with significant assets but also grave defects.

On the positive side, in contrast to Greece and to a lesser extent also in contrast to Spain and Portugal, Italy has managed to raise sufficient taxes to run education, health and other social services without major quality drops, and pay fairly high pensions, while having a little extra to service some its 120% of GDP debt (ie it has run primary surpluses). In a near stagnant economy for many years it has prevented that debt, which was  inherited from the 1980s, from going out of control. Of course, it needs to start reducing the debt and one way must be attacking endemic tax evasion starting with Mr Berlusconi himself. But the tax evasion is not of the scale of that in Greece. Moreover, the country as a whole is not bankrupt. The public sector debt is more than balanced by large private sector assets while household and corporate debt is moderate and the banks though under some stress from the weak economy are sounder than in most other EU countries.

Secondly, elections have always been free and fair at national, regional, city and local levels. The television media have certainly been weighted in favour of Berlusconi but there have always been one or more TV channels sympathetic to the left or independent and a leading national daily, La Repubblica, has always been highly critical of Berlusconi.

Thirdly the Italian police and judiciary have not given up the fight against the scourge of organized crime. In particular the progress that was made by two iconic magistrates, Giovanni Falcone and Paolo Borsellino, was not reversed following their assassinations by the Sicilian mafia, both in 1992. Helped by a movement of Sicilian businesses Addio Pizzo, bravely to refuse to pay protection demands, the mafia in Sicily no longer has the hold over much of Sicilian commercial life that it once did.

On the other hand, there are also huge downsides. Organised crime may have retreated somewhat in Sicily but it has not retreated in Calabria or Campania, where its tentacles spread across business and political life, with evidence of infiltration in countless local authorities, including recently the need for central government take over the city government of Reggio Calabria. It has also made incursions in the north leading in October to the resignation of the Lombardy regional government following the prosecution of a senior member of the government for collusion with organized crime.

 

Monti has transformed Italy’s image but how deep are the changes?

The present government of Mario Monti, a leading academic from the private Bocconi university and former EU commissioner, and consisting entirely of tecnici has been in office for a year since November 2011 and has five months before the next election is likely has to take place in April (in fact March 10th is being discussed as a likely date). In some ways, most notably regarding the image of the Italian government both to its own population and abroad, the change has been dramatic. From President Obama to Angela Merkel, Mr Monti is a respected interlocutor. However, whether the government has made long-lasting changes to Italy’s political and economic culture is less certain. It has dealt with the fiscal crisis well, but to fundamentally turn round Italy’s public finances in a year and a half at a time of recession was never likely. In terms of new legislation, its achievements have at best been modest. It is perhaps early to assess definitely whether a labour market reform introduced in June will be successful in its aim of opening job opportunities for young people, but any improvement is at best likely to be gradual. An anti-corruption law, which was passed by parliament in early November, has been criticized as inadequate. With both these measures, it must be pointed out that the Monti government can only do what a majority in the two houses of parliament will support and actual practice is in any course more important than what is permitted by law. The justice minister, Paola Severino, has described a new wave of corruption allegations (not affecting the Monti government) as a new tangentopoli (polity of bribes) like the one that swept away much of the political class in 1992.

The immediate priority is for the parties to agree on a new system for electing the two houses of parliament. The present system referred to by the derogative term “Porcellum” was introduced in 2005 to suit the needs at the time of Berlusconi and his allies. It removed any ability for voters to influence the election of individual members of parliament, by introducing party lists in place of individual constituencies. However, although there is widespread agreement on the need for reform there is no sign yet of agreement on the details. While some bonus for the winning coalition is thought desirable to increase the chances that there will be majorities in the houses of parliament, there is disagreement on the threshold at which this should apply. The dilemma is that the winning coalition may not win much more than a third of the votes; a premium to give it a majority would mean that a government would be able to impose its will though backed by nowhere near a majority of voters. A reasonably high threshold seems essential to avoid a crisis of legitimacy in which a government with a relatively low popular support has a majority for five years in parliament. But the alternative leaves the risk of a parliament with no clear governing majority. In such an event Mr Monti might have to be asked to continue in office as the only way of achieving a government with a parliamentary majority. People like Mr Monti who are willing to serve their country without recompense are a great asset to Italy. But the future of the country will still depend on who Italians elect to represent them at local and regional levels as well as national level.

The chances of a second Monti government became a little more likely on November 17th, when on the initiative of the chairman of Ferrari, Luca Cardero Di Montezemolo, a new centrist movement was formed to contest the election and support a new Monti government after the election. Although opinion polls still suggest that despite the painful economic medicine he has administered Monti has the support of slightly more than half the electorate, this movement would be unlikely to win more than 15% at least unless Monti himself gives it his support, which would mean he would lose his above-party status. The largest party in the next parliament will probably be the left-of-centre Partito Democratico (PD) but with only around 25% it will be nowhere near strong enough to form a government on its own. As in the past it will try to form alliances, but the chances of any coalition around the PD being able to form a government, let alone a stable government, are uncertain. An alliance with a party to its left Sinistra Ecologia Liberta (SEL) is implied by the fact that SEL’s leader Nichi Vendola is one of five candidate in a primary election for the leader of the centre-left, which is to take place on November 25th. (Interestingly the primary election has achieved a high public profile partly through debates on Sky, for Italy a relatively new private TV competitor of Berlusconi’s channels.)

It is too early to say whether a second Monti government would be in Italy’s interest. Certainly, his presence would reassure Italy’s partners and bond-holders. But Monti could not just continue where it had left off. He would have to put forward a programme for a five-year term of government willing take on vested interests and obtain the support of a stable parliamentary majority.