Berlusconi on Very Shaky Political Ground

While the European leaders united in Brussels have given a green light to the Italian government’s reform program aimed at curbing Italy’s infamous debt crisis and fostering its economic growth, Silvio Berlusconi is facing one the most serious internal political crises since he took office in 2008.

His governing coalition was originally made up of three parties and 174 senators (while the opposition had 158), but it has already suffered the defection of former ally Gianfranco Fini — now leader of “Futuro e Libertà” — who was almost forced out of the post of speaker of the house back in July 2010. At the time, the casus belli had to do mainly with justice reforms, but Fini had also accused Berlusconi of being too permissive with his other ally, Lega Nord leader Umberto Bossi.

More recently, however, apart from convincing sarcastic European politicians such as Angela Merkel and Nicolas Sarkozy on the goodness of his intentions, Berlusconi also had to reach an agreement with Bossi’s Northern League Party on several different issues of domestic policy. One of the most pressing being Italians’ retirement age, which is now set at 65 years; Berlusconi would like to raise it to 67. The rationale behind this that there are not enough taxpayers in Italy to sustain the unemployed population, which is also aging fast (youth unemployment is rapidly reaching 30%).

That is why the Italian government has asked European politicians to create the conditions that are necessary for sound structural reforms, a sustainable public finance, and more flexibility in the job market (firms should be allowed to dismiss workers more easily, if necessary). The last point, in particular, had provoked the outraged reaction of Italian trade union leaders. Italy has three different (and powerful) trade unions: the Cgil, the Cisl, and the Uil. Given the absence of any form of Thatcherism in Italian politics, these unions can pretty easily mobilize masses and organize strikes.

Susanna Camusso of Cgil has been particularly critical about flexibility in the job market and employers’ rights to lay off workers: “[T]he prospects for this country will be renewed only once we will be able to go ahead with the only sensible dismissal: the one of the government in charge,” she said during a meeting Friday, October 28. Raffaele Bonanni of Cisl gave the same advice: “[Y]es, we can start discussing job market related problems, but only at one clear condition: we absolutely do not want to talk about layoffs.”

Meanwhile, Democratic Party leader Pier Luigi Bersani has just labeled the so called “easy-dismissals” proposals contained in the Italian “letter of intents” to Brussels as an “unacceptable threat,” while his colleague Dario Franceschini has called into question the very feasibility of such measures.

Another extremely pressing issue that Berlusconi must face has of course to do with Italian public debt, now close to $1,933 billion USD, which equals 119% of Italy’s GDP. That is why EU President Herman Van Rompuy has recently asked for a “major effort on the part of the Italian authorities” in order to bring the sovereign debt down as much as possible. However, this seems to be at odds with Italy’s desperate need for swift economic growth: some economists are in fact skeptics about austerity measures and the most recent monthly economic outlook from Banca di Siena (founded in 1472) reads that “the heavy austerity measures are choking economic growth” and that the fears of a double-dip recession are once again en vogue.

More in general, while the gossip of alleged sexual scandals revolves heavily around the figure of Berlusconi, opposition leaders are starting to think about the possibility of early elections. According to Pierfrancesco Casini of the Union of Christian and Centre Democrats, the next week will be crucial in order to understand whether or not Italians will have to vote for a new government sooner than they expected. In case of further political chaos, early elections will probably take place in April 2012. Instead, if the present cabinet somehow manages to endure political and economic turmoil, there will be no elections at least until April 2013; but at that point Berlusconi’s third cabinet would have already accomplished its quinquennial mandate.

This grand finale, however, will depend more upon the fate of  the global economy than on the outcome of domestic political issues. Actually, Silvio Berlusconi has recently appeared particularly confident of the fact that Italy is on the road to recovery. But even though the present economic situation must be read in the context of the global financial crisis and that tension in financial markets has been (at least partially) a consequence of multiple speculative attacks on sovereign debts, politicians in Brussels are still seriously concerned that Italy will bite the dust of insolvency next.

Ultimately, regardless of the fact that the ratio between national debt and GDP in Italy has been growing less than in other countries since 2008, and that the fraction of deficit/GDP is lower here (4.6%) than in other European countries such as France (7/7.1%) and Spain (9,2/9,3%), Berlusconi’s shoes, more than ever before, are walking on very shaky ground these days.