Da Financial Times del 21/03/2006
Originale su http://news.ft.com/cms/s/8a42a39e-b87f-11da-bfc5-0000779e2340.html

Italy's woes expose political flaws

di Tony Barber

Soon after Italy's 1948 election, a titanic clash between Catholicism and communism that defined national politics for the next four decades, an editorial appeared in the Nuovo Corriere della Sera newspaper. Italians, it said, were exhausted with the "inefficient, uncivil political hullabaloo" and just wanted "work and food".

Less than three weeks before Italy's 2006 election, it can safely be said that today's Italians have enough food, not enough work and more than enough "political hullabaloo".

Intelligent discussion of Italy's economic and social problems has not been wholly absent from this election campaign. However, when one chief executive of a partly state-owned company was asked if he thought Silvio Berlusconi's centre-right government or Romano Prodi's centre-left opposition would take vigorous steps to reform the economy, the answer was succinct: "No."

Yet few Italians in politics, business or the upper echelons of the civil service dispute that such reforms are more necessary than ever, now that Italy has replaced Germany as the eurozone's unofficial "sick man".

"We all know Italy's troubles are structural. The country has underperformed the euro area in 13 of the past 15 years. Demographic projections show a 30 per cent drop in the working-age population over the next 40 years. The debt-to-gross domestic product ratio is now back to a rising trajectory," says Vincenzo Guzzo, economist at Morgan Stanley.

"The new government will have to provide convincing arguments that the country is still well equipped to live and prosper in the European monetary union," he adds.

Italy, whose economy recorded zero growth last year, may indeed be a test case for the eurozone's long-term survival. But its problems are so deep-rooted that the next government, whatever its political complexion, can do little more than make a start at solving them.

Countries friendly to Italy, as well as world financial markets, are keen to see the next government restore order to the public finances and get to grips with Italy's steady loss of business competitiveness over the past decade.

But Mr Berlusconi and Mr Prodi are showering voters more with promises of spending than with threats of belt-tightening. Mr Berlusconi says he will raise the minimum pension, cut income and corporate taxes, lower VAT rates on tourism, and give free TV licences and access to public transport for the elderly.

Mr Prodi is promising big credits for families with children, cuts in labour taxes for employers and less severe reforms to the state pensions system than the government passed last year.

"Both sides have a bias for state intervention in the economy," says Lorenzo Codogno, economist at Bank of America. "Italy needs a massive dose of pro-growth reforms, deregulation and liberalisation of products and labour markets, privatisation to reduce the still large presence of the state and a big shake-up in the public administration, which despite absorbing huge and growing resources is still largely inefficient."

He adds: "The electorate prefers more social protection and social spending than lower taxes and deep supply-side reforms."

Even though there is no short-term fix for the economy, the election presents Italians with a meaningful political choice. There are profound differences bet-ween Mr Berlusconi, the extrovert billionaire who has been premier for the past five years, and Mr Prodi, a reserved, professorial former premier and European Commission president.

Mr Berlusconi is Italy's wealthiest man, controls its largest private media company, has business interests in everything from insurance to football and has repeatedly stood trial on fraud and corruption charges, though he has never been definitively convicted. Mr Prodi's curriculum vitae, which includes spells as an academic specialist in industrial policy, is positively dull by comparison.

According to Mr Prodi, another difference between the premier and himself relates to Italian society's political culture and ethical values.

"There's been a moral decline in the country," he told a rally last month, "a decline that these five years of centre-right rule have produced to a degree difficult to quantify. Vulgarity has been preferred to beauty, lies to truth, and arrogance to intelligence."

The campaign certainly has highlighted questions about the quality of Italy's democracy, and how far the political system is responsible for blocking economic reform.

In a Eurobarometer poll published in May 2004, the proportion of Italians who were "very" or "reasonably" satisfied with the functioning of Italian democracy was 34 per cent - a steep decline from 44 per cent in 1994 and 52 per cent in 1984.

One likely explanation is that people are sick of politicians' rhetoric, which overflows with abusive and often vulgar condemnations of their opponents.

The impression is of a political arena ablaze in constant warfare, a struggle in which neither side is willing to acknowledge the other as a legitimate actor.

For example, Mr Berlusconi began a television interview on March 12 with the assertion that he feared vote-rigging "because that's part of the history of the left".

The political and cultural battle between left and right was at its most intense in 1948, when anti-communists, backed by the Vatican and the US fought a do-or-die campaign to ensure victory for the Christian Democratic party over its communist and revolutionary socialist opponents.

Since the Christian Democrats' demise in huge corruption scandals in the early 1990s, it has fallen to Mr Berlusconi's Forza Italia party to adopt the crusading anti-communist mantle.

In Forza Italia's worldview, the fact that the Democrats of the Left, Italy's main leftwing party, abandoned its communist ideology more than a decade ago counts for nothing.

Conversely, Mr Berlusconi's adversaries paint him as a mortal threat to democracy, a leader who has spent five years passing legislation to help himself, and his political and business friends, escape the law.

With each camp denouncing the other as illegitimate, the very bedrock of Italy's democratic system - its 1948 constitution - has been brought into question.

Mr Berlusconi's government has introduced sweeping changes that strengthen the premier's powers, reduce those of the head of state, shake up parliament and the judiciary, and give more autonomy to Italy's regions - a specific demand of the populist Northern League.

While all these changes are subject to a referendum, expected in June, they represent a fundamental break with past practice in that Mr Berlusconi's parliamentary majority adopted them without seeking cross-party consensus.

Similarly, with an eye to its electoral fortunes, the Berlusconi government last year unilaterally changed Italy's voting rules, abandoning a first-past-the-post system and adopting full proportional representation.

Mr Prodi's forces say that, if elected, they will get rid of the new electoral law and do their utmost to defeat the constitutional changes in the referendum.

If the opinion polls that give the centre-left a lead of 3 to 5 percentage points over the government are accurate, it is Mr Prodi who will occupy the hot seat as premier after next month's election. Yet Mr Berlusconi's own polls, commissioned by Forza Italia, show his coalition slightly ahead of Mr Prodi's.

The odds appear to favour a Prodi victory, but no one rules out a split parliament with each coalition controlling one legislative chamber.

That is such a recipe for gridlock in economic policymaking that Pier Ferdinando Casini, speaker of parliament's lower house, says there would be no alternative but to ask Italians to vote immediately in another election.

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