Berlusconi Fiddles While Italy Declines

Italy now looks as unsettled and decrepit as Britain did when Margaret Thatcher assumed power 24 years ago. Fiat wallows in crisis; university rectors resign en mass; judges attend the opening session of the judicial year carrying copies of the constitution as a warning to the government. When he returned to power, Silvio Berlusconi promised bold Thatcherite reforms to set things right. His reforms, however, have been few and insipid, aimed mostly at benefiting himself, says Ferdinando Targetti.

Italy is in economic decline. Its share of exports in world markets is contracting. On the list of "most competitive countries" prepared by the World Economic Forum, Italy has fallen in one year from 26 th place to 39 th . Unemployment is higher than the EU average (9% against 7.6% ). Inflation is nearly twice that of France and Germany, though all three countries use the euro. The ratio of debt to GDP (110%) is almost twice the European average and growing. Fiat's crisis may see the country lose its last great internationally competitive industrial enterprise.

In response, Italy's President has asked the entrepreneurial classes to help shore up the country's competitiveness. Unions should return to the policy they adopted during the successful struggle against inflation in the 1990s. The state must improve public services, strengthen the educational system, and devote greater resources to research and development. The government must reform social welfare and pensions.