Election 2008: Berlusconi Comeback Likely as Italy Goes to the Polls

Italian voters are heading to the polls on Sunday (13 April) for a general election following the collapse of Romano Prodi's centre-left coalition government in January after just 20 months in power (see Italy: 25 January 2008: Italian Political Crisis Intensifies as PM Resigns). Following two months of rather subdued campaigning, the leaders of both the centre-right and centre-left have amplified their rhetoric in the closing days. In contrast to the April 2006 election, when there were 20 parties and two broad coalitions, only four principal party groupings are being presented to the electorate this time. The two main parties competing for a parliamentary majority are the centre-right People of Freedom (PDL), led by two-time prime minister and businessman Silvio Berlusconi, and the recently formed centre-left moderate reformist Democratic Party (DP) led by former mayor of Rome, Walter Veltroni. The PDL, composed of Berlusconi's old Forza Italia (Go Italy) party and the right-wing National Alliance (AN), is joined in the centre-right umbrella grouping by the xenophobic Northern League (LN) and Sicily's Autonomy Movement. Former centre-left prime minister Lamberto Dini and the far-right Alessandra Mussolini are also joining the PDL electoral list. Meanwhile, the DP, the result of a merger of the former Communist Democrats of the Left (DS) and the centrist Catholic Margherita party, has decided to break with Italian tradition and not enter into a coalition agreement with smaller parties in a bid to avoid becoming beholden to such groups, as occurred in the previous administration. The remaining two groupings are one comprising the Rainbow Left, a coalition of the Greens and two Communist parties, and a centre-based coalition led primarily by Pierferdinando Casini's Union of Democratic Christians and the Centre (UDC).

Both the PDL and PD have been careful not to make too many promises in the run-up to the election since they are both well aware, as is the electorate, that Italy's economic woes cannot support any grand spending plans or dramatic tax cuts. Latest polls have indicated that Berlusconi has managed to retain his leading position throughout the campaign, but that Veltroni has narrowed the gap to a still significant 6-9 points.

Realistic Economic Promises

From an economic standpoint the policies of the two main parties are very similar, with both promising to call for tax and public spending cuts and more investment in infrastructure. However, the economic policies of both the main parties are weighed down by the fact that Italy has the slowest-growing economy in Europe; the outgoing government recently slashed its GDP growth projection for 2008 to 0.6% from an already meagre 1.5%. Furthermore, Italian debt now stands at 1.4 trillion euro (US$2.2 trillion), a figure well above the country's annual GDP, and the cost of servicing the interest on this debt amounts to a huge 1,200 euro per capita. Finally, an 8 April report from the Organisation for Economic Co-operation and Development (OECD) ranked Italy last in terms of labour productivity—demonstrating the country's almost non-existent competitiveness in Europe.

Berlusconi has unveiled a programme that includes reductions in income tax, housing tax, corporate tax, and value-added tax (VAT), as well as lowering tax revenues as a proportion of GDP to 40%. The PDL has also promised to raise state pensions, offer “baby bonuses” in order to boost Italy's decreasing birth rate, and provide subsidies or aid to young couples and low earners. Finally, if elected, it plans to initiate policies to combat widespread tax evasion, reduce public spending, and lower the public deficit and debt by selling or renting 700 billion euro of public property. Berlusconi has also taken it upon himself to become the champion of an Italian-led takeover of the almost bankrupt national carrier Alitalia, possibly causing irreversible damage to the Air France-KLM bid, which the previous administration had taken almost two years to secure. His stance on this issue could be regarded as a ploy to secure votes, since the Air France-KLM takeover would have meant a large number of redundancies in northern Italy, a traditional stronghold of Berlusconi's. Although such a vote-grabbing move is to be expected by a politician in the run-up to an election, it raises memories of Berlusconi's previous time in power, when he employed short-sighted policies for personal gain, often at the expense of the longer-term national interest.

The DP has also offered a number of moderate economic policies, including pledges to cut income tax by 1% per year for three years, lower taxation on bank deposits, raise child benefits, and set the minimum wage at 1,000 euro per month for temporary workers. It has also offered to provide tax benefits to pensioners and provide a subsidy of at least 500 euro a year to low-income families to help them cope with rising inflation. Like Berlusconi, Veltroni has also promised to combat tax evasion and sell off real estate, as well as setting definitive goals for reducing the enormous public budget. The main point of difference is the amount the promises will cost, with Italian business daily Il Sole-24 Ore claiming that implementation of Veltroni's campaign promises would cost between 20 billion euro and 27 billion euro, opposed to 87 billion euro for Berlusconi's pledges. Given Berlusconi's history in office, there is a real danger that the cost of his policies would worsen Italy's public deficit.

Non-Economic Issues Take a Back Seat

The issues on which the two main candidates differ most, such as immigration and social polices, have taken a back seat to the pressing economic woes of the country. However, these are the areas where the two candidates are likely to win or lose votes since their economic pledges are almost identical. Berlusconi has always advocated a tighter immigration policy, something that was exemplified by the Bossi-Fini law passed by his previous government, which set an annual quota for foreign workers and only allowed residence permits to be granted to workers with job contracts. In the election run-up the PDL has presented migration as a threat to Italian citizens and has promised to further crack down on immigration and step up forced removals of illegal migrants. Conversely, Veltroni has encouraged the integration of migrants and has portrayed immigration as an opportunity to boost Italian growth and development, with a special emphasis on regulating the right to asylum, introducing stronger laws to defend religious faith and freedom, and conferring the right to vote after five years of permanent residence.

Political Gridlock

One of the main challenges that will be faced by the victorious candidate is the need to bring about essential reform of the political system and electoral law. Italy has had 61 governments since the end of the Second World War—a situation that has brought with it a high degree of instability and inconsistency of policy. Furthermore, because of the large number of small parties in parliament (Prodi's coalition comprised 10 different parties) coalitions are broadly unstable and unwieldy, and smaller parties are able to hold their larger counterparts hostage. The current electoral law, which Berlusconi's' previous centre-right government rushed through just before losing to the centre-left in 2006, favours the formation of unstable coalitions with small majorities in the Senate (upper house of parliament), making it difficult to push through any legislation. There has been widespread speculation that Berlusconi and Veltroni would co-operate on the creation of a ”grand coalition” if the vote in the Senate is, as expected, too close for either party to push through electoral reforms; speculation that has been intensified by the rather lacklustre conciliatory campaign run by both sides. Rumours have suggested that the two sides would share power long enough to reform the electoral law to ensure a two-party system. The likelihood of such a scenario remains uncertain, since Berlusconi could be reluctant to enter into such a power-sharing coalition or to reform the electoral law until the last possible moment, as it would require a new election to be called.

Outlook and Implications