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Photo Gallery: The Return of Italian Political Chaos

Foto: FABIO MUZZI/ AFP

The Italian Patient Resisting Berlusconi's Charms

Silvio Berlusconi may be back with his customary bombastic campaign promises. But will the Italians bite? If they do, it could spell doom for the country. If they don't, Italy's tradition of political instability might return anyway.

The rumors had been swirling for days, and there were mysterious Tweets coming from a certain Berlusconi2013. Then, last Sunday, it was finally time for Berlusconi's big surprise, when he announced "la proposta shock," -- his big campaign promise. Critics promptly dubbed it a "proposta sciocca," or foolish proposal.

It was 12:32 p.m. in the old Milan convention center when Berlusconi explained that he not only intended to abolish the real estate tax but also wanted to reimburse those who have paid it by March -- in cash if necessary. "You can pick up your money at any post office," he says. "If you vote for me."

The announcement triggered shrieks of delight only three weeks before the election. "Silvio," one woman shouted, "you are a legend!" The financial markets were less impressed and immediately reacted negatively. Europe had believed this particular chapter was over. But there he was again, the undead of Italian politics, the gifted populist and vote-getter.

Berlusconi's promise zeroed in on a property tax levied on homeowners. Some 80 percent of Italians live in their own home and are subject to the payment, one that Prime Minister Mario Monti had reintroduced as part of his effort to clean up Italy's deficit-ridden government budget. The tax came due a week before Christmas.

It invigorated Berlusconi's fans, who began waving the flag of the party Berlusconi founded, "The People of Freedom" (PDL), and playing its 2008 campaign song, "Meno male che Silvio c'è," or "It's a Good Thing that We Have Silvio." The party is currently working on a new campaign song.

"Vote-buying" and "corruption," Monti cried. "Demagoguery," shouted the center-left camp led by Pier Luigi Bersani, but they sounded like spoilsports.

The Mummy Has Returned

Berlusconi upped the ante a day later, promising an amnesty for tax evaders, of which there are many in Italy. The amount of tax revenue lost to tax evasion -- some €120 billion ($160 billion) -- is the equivalent of 6 percent of Italy's sovereign debt.

Berlusconi's return to the political arena is a shock. It would be his sixth candidacy, his "last great political battle," as he calls it. He will be 77 this year and is currently defending himself in two court cases. It's been hardly a year since the rating agencies downgraded Italy's credit rating because of its unstable political situation, and Berlusconi submitted his resignation on Nov. 12, 2011.

But now the mummy has returned, and has rapidly become the most important personality in the pending general election. A remark by Berlusconi, like the one he made on Sunday, is enough to cause the markets to plunge and the risk premiums for Italian sovereign bonds to rise. It is enough to trigger the return of worry about the Italian patient, the fear of contagion, the euro crisis and political self-paralysis -- in short, the fear of the former Italy.

Thanks to Monti, Europe was able to experience a different Italy for 13 months, a country of reforms in which calcified ways of doing things were being changed. For 13 months, Monti spearheaded a silent revolution, the markets regained confidence in Italy and the country was spared social unrest. To its neighbors, it seemed that for the first time in a long time, a form of policy was being pursued in Rome that had more in common with Max Weber than Federico Fellini: a patient implementation of the necessary rather than a garish display of vanities and favors.

Now, however, things are once again going well for Berlusconi. He is a fighter, he says, "destined to win." As the campaign has progressed, and as revelations regarding the scandal surrounding the world's oldest bank, Monte dei Paschi di Siena -- an affair Berlusconi blames on the leftist city government of Siena -- have become more embarrassing, the better his poll numbers have become.

A Master Salesman

As recently as January, his campaign alliance was trailing significantly behind the real favorite in this election, center-left politician Pier Luigi Bersani, 61, of the Democratic Party (PD). But now the gap has narrowed, depending on the polling organization, to less than 5 percentage points. His rival Monti is only polling at 13 percent, or about half of Berlusconi's result.

Berlusconi is still a master salesman, a man who knows how to campaign better than anyone else. Helpfully, he still also owns several television stations. Hardly a day goes by when he doesn't appear on a talk show, wearing a dark-blue, double-breasted suit, his legs crossed, holding forth in a mixture between stump speech and pure entertainment. He brags about his heroic deeds, talks about how he captured the heart of his new girlfriend, the 27-year-old Francesca, and how he, as the owner of AC Milan, paid €20 million for the football star Mario Balotelli.

It is still his audacity and his intuition for the fears and yearnings of ordinary Italians that captivate the populace. One day, he praises former fascist dictator Benito Mussolini on Holocaust Memorial Day, the next he threatens German Chancellor Angela Merkel with Italy's withdrawal from the euro zone. He complains about the "leftist, feminist judges" who ordered him to pay his ex-wife €3 million a month in alimony. It's all textbook populism, but it works for Berlusconi and has brought him votes.

Some 50 million Italians will go to the polls on Feb. 24 and 25. The question is whether they will put their faith, once again, in a man who has been promising them an Italian economic miracle for almost 20 years, but has in fact driven the country into financial ruin. Or will Italian voters switch on their long-term memory?

They will have a choice between two policy concepts, between Monti's reform course and the art of seduction practiced by someone like Berlusconi, between reason and emotion and between what their heads tell them and their gut feelings.

The decision sounds easy from the outside. But the Berlusconi platform is nothing if not alluring. Furthermore, many families can hardly afford to wait for the fruits of long-term reforms. There is an Italian saying that goes: "Meglio un uovo oggi che una gallina domain." Better an egg today than a hen tomorrow.

A Great Contrast

When the ancient Romans were in dire straits and no one in the Senate knew what to do, an honest man was appointed "dictator." For a short time, he had free rein without having to worry about political majorities. After that, the temporary dictator was expected to step down again, which he usually did.

Mario Monti, 69, most closely approximates this figure in recent Italian history. He was directly appointed to the position by the Italian president, as a sort of special envoy of political reason and commissioner of the economic imperative. There is no greater contrast possible than that between Monti and Berlusconi, between the extremely levelheaded economics professor and Il Cavaliere, the seducer.

Monti and his cabinet of technocrats had more than a year to turn their attention to the reform projects Italian political parties had never embarked upon, because they were always more concerned about votes and favors than acting in the interest of future generations. Monti refused to accept a salary for his services, as if, by making this small sacrifice, he were invoking the willingness of his fellow Italians to endure hardships.

The financial markets reacted favorably immediately after Monti was sworn in on Nov. 16, 2011. The feared "spread," or risk premium on government bonds, began to shrink. Since then it has remained at a high but not critical level, at least until the Sunday Berlusconi made his campaign promise in Milan.

Monti's results are respectable. He had set out to achieve nothing less than a "general overhaul" of Italian society, complete with its evils and sicknesses, like corruption, mismanagement and Mafia connections. It was time Italy got its house in order, he often said, adding: "We alone are to blame for our plight."

A Return to Italy's Past

Monti has returned the country to the international stage, where it had ultimately become the subject of ridicule under Berlusconi. He introduced a different style, one of respect for rather than derision of the country's institutions, the courts and political rivals.

A professor from Varese in northern Italy, Monti was cautious in his explanations of the country's crises and efficient in resolving them. He assembled a €30 billion austerity package and pushed through a pension reform based on the German model, with a retirement age of 66 and greater restrictions on early retirement. It was a huge step for Italy, proving that the Bel Paese (beautiful country), could indeed change. Until then, it had been an oft-derided idiosyncrasy that Italians were to retire extremely early in some cases. Pensions are one of the root causes of Italy's debts.

Italy was on the verge of collapse when Monti took the reins. British and US analysts were betting on a national bankruptcy and a scenario similar to what had happened in Greece. "Italy has become a different country," Switzerland's Neue Zürcher Zeitung newspaper concluded after Monti had been in office for 100 days. But soon Italians began to reject the changes. Taxi drivers and pharmacists were the first to successfully fight the curtailment of their privileges. No Italian government has ever managed to prevail against the tassisti contingent. Monti should have remained resolute, but he didn't have the necessary mandate.

A further example is provided by the fate of Monti's attempt to reduce the number of provinces (and thus provincial politicians) from 86 to 51. There is no reasonable explanation for the fact that a prefecture exists in the town of Isernia, and one that costs 14 times as much as the one in Milan.

Minister for Public Administration and Simplification Patroni Griffi felt that the communal and regional administration could take on additional tasks. But then all affected provinces, with governments on both the left and the right, claimed historical particularities, filed lawsuits, and cited exception clauses and the right to codetermination. Nothing would work without "a serious debate among all institutional, political and social players," according to a statement by trade unions in the Latium region.

Falling by the Wayside

Not surprisingly, Monti's reformist zeal began to wane halfway through his time in office. There were a few more crackdowns on tax evaders in ski resorts, but not much after that. A deregulation of the labor market, including the loosening of protections against wrongful dismissal, was intended to put an end to the two-class system in which older employees are well protected but younger ones have few rights and myriad uncertainties. It failed after being negotiated to death in the parliament, leading to a compromise instead of significant reform. Unemployment among young adults has since jumped to almost 37 percent.

Monti has gotten many efforts off the ground but has not brought them to completion. Both an anti-corruption law and a campaign reform fell by the wayside. Monti's efforts to dismantle the inflated government bureaucracy, with its favoritism and constantly obstructive unions, did not progress. He only managed to cut a tiny fraction of government spending, eliminating a mere €4 billion from a total budget of €800 billion, with another €11 billion in cuts planned for 2013. But even this tentative adjustment resulted in a significant battle in parliament, complete with hundreds of proposed amendments and 33 votes of confidence.

There was a jolt, but over the centuries Italian society has become masterful at elegantly offsetting sudden change. And the effects of Monti's reforms haven't been felt in the real economy yet. Italy lags far behind its competitors in productivity and unit labor costs haven't declined significantly.

And Berlusconi, one of the richest men in Italy, never tires of playing the social rebel on television. "This man there," he says, referring to Monti, "has increased unemployment by half a million in 13 months. That's the reality, not gossip."

Most of all, the promised growth has failed to materialize. And that even though -- or as critics, say, because -- Monti adhered to the creed of Merkel-style economics. He had a commissioner comb through government spending and cut expenditures. He raised the value-added tax to 22 percent and reintroduced the hated property tax. All of this was done to reduce the government deficit for 2013 and satisfy EU requirements.

His austerity program cost Monti a great deal of support and produced few results. Italy faces yet another year of recession. The economy contracted by 2.1 percent in 2012, and another 1 percent decline is forecast for this year. Italy also remains unattractive to foreign investors, ranking 73rd on the World Bank's ease of doing business index.

Battling the 'Monster'

Indeed, it takes a martyr's constitution to complete an investment in southern Italy. In November, Shell abandoned a liquid gas plant project in Sicily. British natural gas giant BG gave up a similar project in the southern city of Brindisi, after having spent €250 million on planning and facing 11 years of resistance at all levels. That resistance included environmental concerns, even though one of Europe's most notorious coal-fired power plants belches its fumes into the air above Brindisi. Natural gas would be cleaner, but now gas is becoming scarce and more expensive because it has to be imported.

The Monti administration supported the project. So did Berlusconi when he was prime minister, which didn't stop a fellow party member in Brindisi from leading the protests and describing the planned gas plant as a "monster." Better an egg today than a hen tomorrow.

Monti has helped his country a little and shaken it up a bit, but Italy nevertheless remains more or less the same place. At the beginning of his transitional government, Italians saw Monti as a man of the banks who could protect them from disaster. Now they are seeing the once serious, cool-headed professor turn into an ordinary politician and aggressive campaigner. Trust has waned as a result.

Monti's campaign is destined to become an ill-fated one. Critics have said that it was a mistake for him to descend from his role as a technocrat into lowly partisan politics. The truth is that he hesitated for a long time before deciding to run. Both his wife and the country's president were against it. The name of his campaign alliance sounded too complicated: "Scelta Civica con Monti per l'Italia," or "Civil Decision with Monti for Italy." How could anyone remember that? He seems stiff on television and stopped talking about substance long ago, choosing instead to attack his old and now new nemesis, Berlusconi.

It's a very Italian election campaign that is now entering its critical phase, a mudslinging match filled with sleights of hand and polemics, and yet devoid of any significant discussion of party platforms or of the dramatic situation facing the country.

Potential Devastation

Bersani is still considered the frontrunner, and it seems likely that he will become the next Italian premier. He has been a social democrat for more than 20 years, and before that he was a communist. The son of a filling station attendant from the Emilia Romagna region, he is part of "La Caste," the unpopular political caste. He is an apparatchik who served in various cabinet positions under former Prime Minister Romano Prodi, always remaining inconspicuous.

But in late 2012, in his party's primary, he roundly defeated the young mayor of Florence, Matteo Renzi. In a record turnout, more than three million people voted in the primary, making Bersani the top candidate of all those who were tired of Berlusconi's bunga-bunga escapades, and of people who longed for political stability and social justice.

But no matter who is proclaimed winner of the election on the evening of Feb. 25, it is already becoming clear that achieving a stable majority in both chambers of parliament could be tricky. Yet a shaky government (it would the 60th of its kind since 1947) that is forced to step down after a few months would be devastating. Not just for Italy but for all of Europe.

So how much damage can Berlusconi do? Bersani's alliance could end up with a small majority in the parliament; under current election law the party receiving the most votes automatically receives at least 54 percent of seats.

It is, however, a different story in the Senate, the second chamber of parliament, where the seats are assigned to senators from the regions. If Berlusconi manages to capture Lombardy together with the Northern League, he could block a center-left government's proposals. Lombardy is the most important swing state -- the Ohio of this Italian election.

The Show Goes On

And Berlusconi has an interest in doing all he can to prevent a leftist majority in the senate. He hopes to be able to torpedo laws in the future that would limit his media empire or allow him to be prosecuted. He knows that his chances of becoming prime minister are slim, which is why he has nothing to lose. He lies and makes promises he cannot keep, determined only to make sure that the show goes on.

Other populists are also gathering votes in the race to the finish line. One of them is Beppe Grillo of the protest movement "Movimento 5 Stelle." Grillo travels around the country on a "tsunami tour," hates Merkel, doesn't want to repay a cent of debt and is seriously calling upon Al-Qaida to bomb the parliament in Rome, saying that he would even provide the terrorists with the necessary coordinates. Polls estimate that Grillo has the potential to capture 20 percent of the vote. He could become the third-strongest force by securing the support of the sizable number of undecided Italians who are weary of politics.

With the election only two weeks away, everything remains up in the air. There is still hope that 50 million Italians will activate "le memoria," or their powers of recollection. And even if they don't, the country can look back on a brief Italian spring, a period during which the sole objective was not to destroy one's political opponent, because fear of the abyss brought all camps to a cease-fire.

For political veteran Pier Ferdinando Casini, this period already seems to have been a "miracolo," a true miracle. He is a Christian democrat. He is allowed to believe in miracles.

Translated from the German by Christopher Sultan