Analysis: Beleaguered Berlusconi hangs on for now

Reuters News
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Posted: Sep 07, 2011 3:34 PM
Analysis: Beleaguered Berlusconi hangs on for now

By James Mackenzie and Francesca Landini

ROME (Reuters) - Italian Prime Minister Silvio Berlusconi's parliamentary majority should allow him to see off the growing army of critics who want to see him gone, leaving his struggling government hanging on, at least for the moment.

The premier, who turns 75 later this month, is in a corner facing scandal, mass street protests, unruly coalition partners, an increasingly disillusioned business establishment and, worst of all, a hostile bond market.

Having entered politics in 1994 pledging to transform Italy with the business acumen he used to build his vast media empire, he now depends on the European Central Bank to buy Italian bonds to stop a 1.9 trillion euro debt pile sliding out of control.

Italy's borrowing costs, once almost as low as Germany's, have shot higher over worries about Rome's ability to control its public finances, demolishing the government's boast of having shielded Italians from the euro zone debt crisis.

The coalition with his Northern League partners has been shaken by infighting over tax and pension measures and he has been in open conflict with his Economy Minister Giulio Tremonti.

At the same time, Italy's sclerotic economy has squeezed ordinary Italians ever more tightly and public anger over austerity measures many judge to be unfair brought hundreds of thousands of protestors to the streets on Tuesday.

Opinion polls put Berlusconi's approval ratings in the low 20 percent range, European partners have heaped scorn on his center-right government's handling of the crisis and the ECB has said it will not keep supporting Italy indefinitely.

The premier should be down and out but the center-left opposition has struggled to establish itself as a cohesive political force and make capital from either the government's floundering record or Berlusconi's multiple personal scandals.

As Wednesday night's comfortable victory in a Senate confidence vote on the austerity measures underlined, the government has the numbers to survive, at least for the moment.

"It's a very serious situation," said Renato Mannheimer, one of Italy's leading pollsters, whose regular survey in the Corriere della Sera newspaper this week showed 8 out of 10 Italians opposed to the government and a similar number critical of the center-left opposition.

"There's one scandalous episode after another, there's the economic crisis, we're being observed very critically by the world at large and there's generalized distrust of the political class," he said.

"But as long as Berlusconi can hold his majority together in parliament, the situation remains, unless there is some outside shock from the bond markets or something similar," he said.

TECHNICAL GOVERNMENT

That does not mean the increasingly tense coalition between the People of Freedom (PDL), a party built entirely around Berlusconi, and the pro-devolution Northern League will get much done. Few believe it will survive until elections scheduled in 2013.

Berlusconi is no longer the undisputed master of Italian politics and business and newspapers speculate daily about the prospect of his replacement by a technical government of experts or a temporary cross-party administration that could push through tough reform.

His coalition's chaotic handling of the austerity plan has caused deep alarm among the tightly interwoven business and political establishment whose support has traditionally been needed for Italian governments of all colors to survive.

"We talked a lot about a government of technocrats or a 'wide-majority government'," said one senior banker who attended last weekend's Ambrosetti forum, the annual gathering of Italy's business elite at Cernobbio on the shores of Lake Como.

"We need a government that is able to react quickly but...a government which has the support of parliament can't be replaced," he said.

The wrangling over austerity measures to bring Italy's creaking public finances under control has nonetheless shown how deeply divided the coalition has become and how far Berlusconi's own power to enforce agreement in cabinet has weakened.

Business leaders at Cernobbio watched in shock as an urgent call for action by ECB President Jean-Claude Trichet was answered by Tremonti with nothing other than vague assurances and sweeping reflections on history and philosophy.

"It seemed like he couldn't promise anything on behalf of the whole government. He seemed not to have the power to do so," said the banker, who was present at the closed-door session.

Although parallels are not exact, there is increasing talk of the dark days of "Tangentopoli," the "Bribesville" scandals of the early 1990s when Italy's political order was driven out in a wave of popular fury at its corruption and inefficiency.

"We have that climate a little bit and I think at a certain point, if they ask for more sacrifices, things could blow up," said Turin University political scientist Luca Ricolfi.

Berlusconi's own state of mind has appeared distracted, even if the bitter pledge to quit "this shitty country" picked up in a recent police wiretap may have been the result of passing frustration rather than a firm intention to leave his homeland.

Even while he deals with the crisis, his time is taken up with yet another brush with scandal.

On Tuesday, he will be questioned by magistrates investigating allegations that he paid hush money to a businessman who introduced him to prostitutes in a scandal dating back to 2009.

He rejects the suggestion and says the affair has been concocted by leftist magistrates seeking to drive him from office. For the moment, that may be his biggest risk.

(Editing by Jon Boyle)