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.
The entire political spectrum, indeed, must recognize the country's predicament and find common ground for legislation. But this will be impossible so long as Prime Minister Berlusconi dominates Italian politics.
Berlusconi is a new phenomenon on the European right. In recent decades, mainstream right-leaning parties in most Western countries evolved from a defense of tradition (sometimes with a tinge of nationalism) to a more liberal worldview favoring a limited role for the state and greater individual responsibility. Coming from the pinnacle of Italian business, Berlusconi might have been expected to conform to this pattern. In fact, however, Berlusconi represents political extremism and programmatic ambiguity.
Berlusconi's extremism manifests itself in several ways. First, he thinks of politics as a soccer match. On one side are the "good guys," the
Azzurri
(the Italian national team, in their blue shirts), led by a manager who, because he was successful in business, is convinced he will be successful at managing the state. On the other side are the bad guys, the Reds, who, because they are politicians, do not know what it means to work.
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Berlusconi's vision of democracy--more populist than liberal--is that everything is allowed to those who win, even changing laws to favor the prime minister's special interests. His government has done so at least three times. It passed a law making it easy for politicians to ignore conflicts of interest, authored tendentious legislation on media ownership (Berlusconi controls much of Italy's media), and effectively got the Prime Minister off the hook on a series of criminal indictments.
But Berlusconi is also a master of ambiguity, someone who appeals to liberal values while pursuing an anti-liberal, populist, and corporatist agenda. Giulio Tremonti, Berlusconi's Economy and Finance Minister and ideologue of the alliance with Umberto Bossi's xenophobic
Lega Nord
, declared in a recent interview: "Let's be done with the utopia of privatization. The right does not remain static and it does not reject the idea of state intervention."
According to Tremonti, what Italy needs are a "new European protectionism" against unfair competition from developing countries and a rightwing "New Deal" that rejects independent enforcement of antitrust laws in favor of corporatist ideas.
In reality, Italy's government has done little on the economic front, and what it
has
done it has gotten wrong. The Prime Minister often speaks about pension reform, but has failed to offer any new proposals. He has not supported any major privatizations; indeed, he tried to restore to government hands control of energy and banking.
The only economic policy put into effect took the form of industrial subsidies. To finance this, the government passed a series of amnesties, forgiving penalties for past tax evasions, allowing underground business to come above ground without paying its obligations, and allowing Italians to bring capital illicitly stashed abroad back into the country.
In the last budget, revenue from amnesties amounted to eight billion euros, and the fiscal reductions for businesses were 7.5 billion euros. To finance measures that require permanent outlays with one-time revenues presages a new spike of public debt--a policy criticized by the European Commission and the IMF.
Another of Berlusconi's economic wheezes is decriminalization of accounting fraud, something his government launched just when the world, in particular America, was establishing harsher punishments for dishonest managers and other fiduciaries.
As to Fiat, Berlusconi's government failed to put forward a Thatcherite scheme aimed at bringing in foreign capital to salvage both it and other declining industrial enterprises. Instead, he backs a plan by a group of Italian financiers to pry control of Fiat from the dominance of the Agnelli family. Fiat controls one of Italy's great newspapers,
Corriere della Sera
, which may become more friendly to Berlusconi with an ownership change approved by him.
Berlusconi's programmatic ambiguity and political extremism are polarizing Italy and radicalizing the opposition. Growing numbers of people, even moderates, are moving into active opposition. In this climate, Italy's decline will be difficult to arrest.
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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.
The entire political spectrum, indeed, must recognize the country's predicament and find common ground for legislation. But this will be impossible so long as Prime Minister Berlusconi dominates Italian politics.
Berlusconi is a new phenomenon on the European right. In recent decades, mainstream right-leaning parties in most Western countries evolved from a defense of tradition (sometimes with a tinge of nationalism) to a more liberal worldview favoring a limited role for the state and greater individual responsibility. Coming from the pinnacle of Italian business, Berlusconi might have been expected to conform to this pattern. In fact, however, Berlusconi represents political extremism and programmatic ambiguity.
Berlusconi's extremism manifests itself in several ways. First, he thinks of politics as a soccer match. On one side are the "good guys," the Azzurri (the Italian national team, in their blue shirts), led by a manager who, because he was successful in business, is convinced he will be successful at managing the state. On the other side are the bad guys, the Reds, who, because they are politicians, do not know what it means to work.
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Berlusconi's vision of democracy--more populist than liberal--is that everything is allowed to those who win, even changing laws to favor the prime minister's special interests. His government has done so at least three times. It passed a law making it easy for politicians to ignore conflicts of interest, authored tendentious legislation on media ownership (Berlusconi controls much of Italy's media), and effectively got the Prime Minister off the hook on a series of criminal indictments.
But Berlusconi is also a master of ambiguity, someone who appeals to liberal values while pursuing an anti-liberal, populist, and corporatist agenda. Giulio Tremonti, Berlusconi's Economy and Finance Minister and ideologue of the alliance with Umberto Bossi's xenophobic Lega Nord , declared in a recent interview: "Let's be done with the utopia of privatization. The right does not remain static and it does not reject the idea of state intervention."
According to Tremonti, what Italy needs are a "new European protectionism" against unfair competition from developing countries and a rightwing "New Deal" that rejects independent enforcement of antitrust laws in favor of corporatist ideas.
In reality, Italy's government has done little on the economic front, and what it has done it has gotten wrong. The Prime Minister often speaks about pension reform, but has failed to offer any new proposals. He has not supported any major privatizations; indeed, he tried to restore to government hands control of energy and banking.
The only economic policy put into effect took the form of industrial subsidies. To finance this, the government passed a series of amnesties, forgiving penalties for past tax evasions, allowing underground business to come above ground without paying its obligations, and allowing Italians to bring capital illicitly stashed abroad back into the country.
In the last budget, revenue from amnesties amounted to eight billion euros, and the fiscal reductions for businesses were 7.5 billion euros. To finance measures that require permanent outlays with one-time revenues presages a new spike of public debt--a policy criticized by the European Commission and the IMF.
Another of Berlusconi's economic wheezes is decriminalization of accounting fraud, something his government launched just when the world, in particular America, was establishing harsher punishments for dishonest managers and other fiduciaries.
As to Fiat, Berlusconi's government failed to put forward a Thatcherite scheme aimed at bringing in foreign capital to salvage both it and other declining industrial enterprises. Instead, he backs a plan by a group of Italian financiers to pry control of Fiat from the dominance of the Agnelli family. Fiat controls one of Italy's great newspapers, Corriere della Sera , which may become more friendly to Berlusconi with an ownership change approved by him.
Berlusconi's programmatic ambiguity and political extremism are polarizing Italy and radicalizing the opposition. Growing numbers of people, even moderates, are moving into active opposition. In this climate, Italy's decline will be difficult to arrest.