Italy’s Revolving Political Door

Alexander Privitera

AGI Non-Resident Senior Fellow

Alexander Privitera a Geoeconomics Non-Resident Senior Fellow at AGI. He is a columnist at BRINK news and professor at Marconi University. He was previously Senior Policy Advisor at the European Banking Federation and was the head of European affairs at Commerzbank AG. He focuses primarily on Germany’s European policies and their impact on relations between the United States and Europe. Previously, Mr. Privitera was the Washington-based correspondent for the leading German news channel, N24. As a journalist, over the past two decades he has been posted to Berlin, Bonn, Brussels, and Rome. Mr. Privitera was born in Rome, Italy, and holds a degree in Political Science (International Relations and Economics) from La Sapienza University in Rome.

Italian Prime Minister Mario Monti’s sudden decision to pull the plug on his own government sent shockwaves across Europe and spooked investors.

In fact, many observers squarely attacked former Italian Prime Minister Silvio Berlusconi for putting his own country and the whole continent at risk by forcing Monti’s resignation and announcing his desire to return to office. Many observers now anticipate a prolonged period of political instability in Italy—poison for a country that saw its economy shrink by more than 2 percent in 2012 and is still quite far from a recovery. Furthermore, the ability of any democratically elected successor to Monti to stick to the path of reform is now in question. Political risk seems to have returned with a bang to the heart of Europe.

By midweek, only days after Berlusconi’s announcement that he wanted to lead Italy once again, the situation had already changed. Berlusconi’s new political crusade increasingly looked like a desperate attempt to avoid being buried in the graveyard of history once and for all.

In fact, the return of the controversial billionaire Berlusconi to the political stage never meant that he had a good chance of regaining power. For months, polls have consistently shown his party, the PDL (Popolo Della Liberta), in free fall—now stuck at about a 15 percent approval rating. Berlusconi thought he could, at the very least, stop the hemorrhage. Instead, he could very well accelerate the bleeding.

Monti’s early exit could turn out to be a very astute decision, as it shortens the period of uncertainty by moving national elections to an earlier date. The political power vacuum in Italy could be filled more quickly than would have otherwise been the case. Monti’s successor could very well be Mario Monti himself, thus confirming that “Super Mario” still has some unfinished business to complete.

Berlusconi first thought that by attacking German-styled fiscal austerity and Monti as a de facto proconsul of a Berlin-based emperor, he would be able to tap into the widespread discontent among Italian voters. It was a miscalculation. He soon discovered that most Italians are still more inclined to blame him for Italy’s ills. On Wednesday, Berlusconi, facing an onslaught of possible defections within his own ranks and a series of slammed doors from his former allies in Italy and Europe, started looking for an exit. He suggested that he could support a Monti government if the current prime minister decided to run as the leader of a moderate coalition, thus completing a remarkable U-turn only days after causing the premature end of the Italian government. Berlusconi quickly realized that as a self-proclaimed general, he lacked the troops needed to start the battle. However, Berlusconi’s showman talents should not be underestimated. He will have an effect on the upcoming campaign in Italy, if only as a stark and colorful reminder to most Italians of why the country needs to close a chapter of its recent history.

If Berlusconi’s center right is really imploding, then a victory for Berlusconi’s arch-enemy, the former communist party PD (Partito Democratico) and its leader Pierluigi Bersani, increasingly looks like a cakewalk. This is where things get complicated. The PD is leading in all polls by a wide margin, but that is mainly the result of the weaknesses in the center right alliance and not a reflection of a new love affair between Italians and the left. Of course, Bersani’s personality and policies do not fit Berlusconi’s characterization as an old fashioned socialist. It is true that, as prime minister, the PD’s leader would align himself with French President Francois Hollande rather than German Chancellor Angela Merkel. Yet domestically, Bersani would broadly stick to Monti’s policies on fiscal austerity and timidly try to further liberalize the economy. However, it is very unlikely that he would pursue any significant labor market reforms or dramatically reduce the size of the byzantine Italian bureaucracy. When facing budgetary shortfalls, he would rather raise taxes than cut spending. Most Italians perceive the tax burden to be excessive as is. This is particularly true for the wide majority of those citizens who have limited possibilities to avoid or evade them altogether. In fact, despite the recent gains in polls, even the PD’s leadership knows that the majority of Italy remains a Catholic and conservative country at heart, suspicious of any central government. The PD would therefore win against Berlusconi or a rudderless collection of smaller parties. But what if the center right found a different leader?

That is a question that everybody in Italy and across Europe is trying to answer. It is for this reason that Mario Monti has become the candidate of choice not only for Merkel, but also for many former Berlusconi allies, perhaps including Berlusconi himself. Their plea to Monti is very simple: don’t hand over the country to the left. Thus, Monti could indeed be a formidable opponent for Bersani. After all, Bersani is perceived as a product of the old system, while Monti is still considered by many to be the outsider—the man who saved Italy from itself.

Nevertheless, descending into the swamp of Italian politics could be immensely damaging to Monti’s reputation. So far, the current prime minister has governed in the name of all Italians. During the course of a potentially bruising campaign, he would have to become a partisan man himself by necessity, especially if he aligned himself politically with Berlusconi’s party. Instead of potentially tarnishing his reputation, Monti could skip the elections. By leaving the campaigning to professional politicians, he could set his sights on different goals, such as the Italian presidency (the term of the current President Giorgio Napolitano expires in spring 2013 and there would be wide support for him among most Italian parties) or perhaps, even more enticing for him, the presidency of the European Commission in 2014.

If, however, Monti thinks that he can stay on the sidelines while waiting for the outcome of the election and still lead the next government, he should think again. It is true that in the case of a hung parliament, he could indeed become the prime minister of a newly formed grand coalition. However, the recent developments in the Italian political arena surrounding the reemergence of Berlusconi could give Monti pause. If Monti does not run, there will probably not be a hung parliament. The left leaning PD will winin all likelihood in a landslide. The outcome would undoubtedly be far better than Berlusconi’s return to power, but it would also fall far short of what both Italy and a Europe in transition really need. Instead of opening a new chapter in Italian history, the current prime minister could very well end up being the former head of one of a number of technocratic Italian governments. He would stand as a man who came on the scene in order to fix the most acute damage caused by Italian politicians, only to hand power back to the very same political class that caused it in the first place.

Monti has a few more days to weigh pros and cons before deciding on his next move. Italy, Europe, and international investors are anxiously waiting for Super Mario to make up his mind.

The views expressed are those of the author(s) alone. They do not necessarily reflect the views of the American-German Institute.