Can Berlusconi, His Image Battered, Survive and Impose Much Needed Austerity Budget?     Print Email

(Dec. 3)  Rome - -  Italy's government faces a precarious test in the form of a confidence vote in parliament later this month -- a symptom of worsening  political instability that is serious not only for the Italian economy but also for the economic stability of the EU.  The Italian parliament is in the process of considering a new austerity budget, crucial for the future of the Italian economy.  If the government falls -- and the austerity budget fails or is postponed -- it will be another domino in an already dire series of fiscal crises affecting the eurozone. 

In Italy, the government led by center-right Silvio Berlusconi has become a coalition in name only since the junior partner, Gianfranco Fini, once an ally of Berlusconi, has become his most fierce rival.  Fini appears crucial for Berlusconi and his defection threatens the survival of the current government.  Fini, who is the speaker of the lower house, has led his new party, Future and Freedom, to defeat government bills four times in the last two weeks. This week the "coalition" was defeated twice as the lower house passed amendments watering down austerity provisions for university reform that had been proposed by the Berlusconi government.

Tensions between Berlusconi and Fini have been rising since July, and the situation became critical after media allegations that the prime minister had entertained a 17 year- old prostitute in his house. Fini, an ally for more than 17 years, seized the opportunity to end a complicated partnership (both personal and political) and start pursuing an independent political path by creating his Future and Freedom Party in October.

Before the schism Berlusconi's coalition could count on 330 votes in the lower house, where majority is 316, and 171 votes in the Senate, where majority is 158.  Now, with  Fini's party up to 33 in the lower house and 10-14 in the Senate, a majority, especially in the lower house, has become elusive for the prime minister.

A confidence vote has been scheduled for December 14, and the recent voting patterns point to the fall of the government.  Berlusconi has survived many scandals in the past, but this may be a case that confirms the operatic adage: "It’s an old Italian tradition that the tenor is idolized until people start booing him."

Italy is the third largest eurozone economy (after Germany and France) and has the eurozone's largest public debt, around 115.8% of 2009 GDP, with a 2009 budget deficit of 5.3% of GDP.  The proposed budget would reduce the budget deficit to 2.7% of GDP in 2012.  The passage of this budget is part of the EU-wide effort to restore faith in the euro amid a series of national fiscal crises. So far, Italy has been considered a possible but unlikely candidate for economic failure. But the collapse of the government before the passage of Italy's budget for 2011 could be a drastic shock. The 2011 budget was adopted in the lower house in November, but now has to be discussed in the Senate in the first week of December.  Can Berlusconi rescue his budget even if he is unable to save his government? Or will politics drag down a eurozone member whose economy was rated as a survivor by most observers?


Patrizio Finicelli is an intern at European Affairs and a graduate student at LUISS Guido Carli University