Sunday, January 25, 2004

Berlusconi’s first ten years in politics

Silvio Berlusconi actually “came onto the field” on 26 January 1994, but always the early bird, he celebrated the anniversary yesterday at an extravagant ceremony at the Palacongresso in EUR here in Rome. The 105 minute speech was remarkably consistent with his opening message a decade ago.

In 1994, he was going to save Italy from Communism. “Then” he declared to rapturous applause from the six thousand supporters, “it was called by its real name and went under the symbol of the hammer and sickel. Today, the Communists and the left have tried to disguise themselves. They’ve had a facelift, but it didn’t work”, proudly vaunting his own successful cosmetic surgery. No false modesty here; he had “saved Italy” and would do it again if necessary, to end what he called “a permanent civil war”.

Not surprisingly, Berlusconi launched his second salvo at the magistrates he calls “Jacobins”, the Milan prosecutors who dealt with the kickback system known as Tangentopoli and then indicted Berlusconi himself along with many of his business associates and employees.

He quoted the ex-Socialist Genoese priest, Gianni Baget Bozzo at length “Fascism was less odious than the begowned bureaucracy which used violence in the name of justice” (Italian magistrates wear gowns in court). “If there was any freedom,” he went on reading Baget Bozzo’s article, “the names of the Milan magistrates, the Di Pietros, the Borrellis, the Davigos, the Bocassinis would be remembered with horror.”

This is strong stuff and he has attacked the magistrature many times before; still, each time, it comes as a shock. To hear an Italian Prime Minister saying that members of one of the institutions of a democratic state are worse than fascism is or should be unusual, especially as it is Mr. Berlusconi himself who resembles Robespierre with all his certainties. There is also something surreal and maniacally illusory to hear him attacking a non-existent political force… and even more peculiar that he has an audience that believes it and laps it up.

For his followers, his charm, part messianic and part variety show compère, is still obviously strong. He still knows how to play the populist chords and work his audience.

He has less of a shine for his allies. He also used the speech to try throw out lines to them to try and bring them in closer ready for the cabinet reshuffle and programme adjustment due this week or next. Rocco Buttiglione criticised the anti-magistrate remarks and Umberto Bossi once again huffed and puffed over the lack of progress towards greater devolution. Fini made no comment.

In practice, yesterday’s event was the beginning of the European Parliament election campaign, five months before the elections. Mr. Berlusconi knows that his strength is as an electioneering politician. Not only does he obviously have the resources – money and media – he is actually very good at it. The operation of “coming onto the field” 10 years ago was a brilliant success. To invent a party in six months and then pull it out of a hat two months before elections, and then win, was unique. Even more so, when he put together the improbable alliance between the Northern League, National Alliance and his new party.

After the inevitable rupture with Bossi and the League seven months later, Berlusconi showed a different quality, persistence in the face of adversity. From having been a “company party”, a “nimble party”, Forza Italia became something approaching a traditional party but despite the growing organisational structures, it remained and remains dependent on the founder. Yesterday’s performance was proof if any were necessary.

It showed once again how 10 years ago Italian politics veered off any other track, not just European. Wealth, control of the media and political power combined in one person are not part of any democratic norm but Berlusconi managed to do it as well as sustaining criminal prosecutions that would have been impossible elsewhere.

But Berlusconi’s decade in politics is not just due to his own ability however great that might be; without the support of parts of the centre-left, in particular Massimo D’Alema who accepted him as his interlocutor for the Bicameral Commission’s proposed constitutional reforms instead of clearing up the conflicts of interest or even applying existing laws. In 1998, Romano Prodi was defeated in Parliament, again with the connivance of part of the left which wanted to see D’Alema as Prime Minister. Those divisions remained till the elections and almost certainly allowed Berlusconi to win in 2001.

If they continue, then tomorrow will mark just the first decade of Silvio Berlusconi political career.

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Friday, January 23, 2004

A comment on "Zitto italiano…" from a diplomat who worked for a long time in Italy and knows the country well:
while I agree with a lot of what you say about Parmalat, I'm surprised you take the Bank of Italy's side on financial regulation. For too many years, and especially under Fazio (who with the euro has less to do elsewhere, and a huge staff), the Bank has promoted cosy cartels in the Italian banking industry and not acted as an effective supervisor of the financial industry. I'd be very happy for Consob to take over.

Friday, January 09, 2004

Zitto italiano se no, pompare tutta la notte


Things are seldom what they seem, skim milk masquerades as cream. W. S. Gilbert

There is an old Venetian story about a sailor who takes ship on a leaky Greek schooner. That night, he wakes to find the water pouring in through a gash in the hull. Alarmed, he shakes the Greek sailor in the bunk next to him “zitto italiano” mutters his companion, “se no, pompare tutta la notte” (shut up Italian, otherwise we’ll be pumping all night). ” And he turns over and goes back to sleep.

As far as Parmalat is concerned, the ship has actually sunk and there must be bankers and regulators of many national hues who acted just like that Greek sailor. One American banker who on the contrary must be feeling pretty smug today, asked Parmalat three questions five years ago. What is the corporate structure of the company? Why do you want to borrow $7bn when you have $5bn in the bank? And finally, why does a milk and yogurt business need so many offshore subsidiaries? He received no satisfactory answers and to the chagrin of his superiors refused to OK a loan and his bank does not appear in the top ten losers. A Bologna relation of the young man, also a banker declared bluntly that he would “rather give a dollar to a beggar than lend one to Calisto Tanzi”, Parmalat’s founder.

These stories were told me off the record; on the record Mr. Tanzi threatened to sue any bank that even suggested Parmalat’s finances might be shaky. In March last year, he made a formal complaint to the Milan Stock Exchange and the Consob, the regulatory body. For the rest of last year, investigations moved slowly forward but as the world now knows, by then, it was not a question of pumping, the ship was already full of water; it just had not sunk yet.

The immediate financial consequences are huge losses for big banks and small investors. The Milan prosecutors have opened a link (Procura della Repubblica di Milano) inviting reports by anyone who feels they have been cheated or lost out over the Parmalat collapse. There will be a raft of civil litigation as well as the criminal cases in all of the countries where Parmalat either operated or where it borrowed money. The globalisation of the fraud is another reason why comparisons with Enron are weak (the other as the FT pointed (29 December), is that Parmalat is missing about €10 bn “This is about 0.8 per cent of Italy's gross domestic product. In terms of relative GDP, the Enron case in the US is peanuts by comparison”.

But there is one connection with Enron; one of the consequences of that case was the Sarbanes-Oxley Act which makes no distinction between American and foreign companies. Banks and accountants who have had dealings with Parmalat could well be liable under the act’s anti-fraud provisions.

The Italo-American divide is visible in the long term consequences too. In the US, when there is a crisis, visible action is taken immediately. Sometimes it works, sometimes it does not. In Italy, partly through the mechanics of coalition government, partly through the intangibles of national culture, there is much talk and little concrete action. These differences will clash over how to deal with Parmalat.

Credibility and confidence in Italian business and business practice has taken a terrible bashing this last year. For very different reasons, two other giants of the Italian corporate world got into trouble, Fiat and Cirio. The fact that this government reduced penalties on false accounting and the Prime Minister’s own companies and employees have been convicted of bribing tax inspectors clearly does not inspire confidence in Italian capitalism either. As Marco Vitale (ex-member of the Consob) hoped for in a series of articles in Corriere della Sera 31 December, 2 and 6 January), now is the time for major reforms.

He knows, though, that they are not going to happen; at least not on the same time span as Sarbanes-Oxley.

The Parmalat fiasco has engendered a turf war between part of the Government and the Bank of Italy. Economics Minister Giulio Tremonti wants to set up a new regulatory authority taking power from the Bank and Consob promising that it would be operative by March Super-authority operativa entro marzo. He is supported by the Prime Minister and his usual ally, Mr. Bossi, but other coalition members are lukewarm and the issue is adding serious strains to the alliance, not critical yet, but they could develop. The opposition is strongly against the proposal “The independence and autonomy of the Bank of Italy are for us a constitutional value” said the DS’s leader Piero Fassino. And indeed in the whole post-war period, the Bank of Italy was one of the few institutions not part of the political spoils sharing.

If put into effect, whatever real or possible efficiency it might have, the new body would be a further concentration of power under the executive’s control.

Finally, a month after the first explosions, there have been almost no suggestions of political involvement but it is difficult to believe that no politician or party had dealings with Mr. Tanzi. The sparring has begun but the real battles are to come.

This is a business story which is going way beyond the dairies of Emilia.

Next week: “Media pluralism? Or how to make money and win elections too” The Gasparri Media Bill back in Parliament and programming control in RAI.

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Friday, January 02, 2004

Looking back, looking forward.

Italian Politics in the new and old years

Iraq, Berlusconi’s legal trials and perhaps tribulations, the European Parliamentary elections and Prodi’s return.

Certainly, no one can complain that Italian politics were boring last year.

There was the war, of course, which produced some nifty acrobatics and some unlikely alliances. In the build-up the Prime Minister had veered from supporting the American interventionist policy after seeing Mr. Bush at his ranch in Texas to supporting diplomacy after conversations with Mr. Putin.

As the invasion drew closer, Mr. Berlusconi took a free ride, using the Constitution as a shield to avoid committing Italian forces at the same time as giving verbal support to Messrs. Bush and Blair. Unlike his friend José Maria Aznar, he did not even have to decide on which way to vote in the UN Security Council as Italy was not a member. Obviously the Prime Minister did not spell out Italy’s refusal to commit troops; the Constitution is not wholly pacifist and does allow Italy to take part in legally sanctioned wars as happened in the 1991 Gulf War. The implication this time was that Government lawyers reckoned there was insufficient legal foundation for going to war. Far from condemning the Prime Minister for being two-faced, many Italians, not only Government supporters, reckoned that he was being an able and furbo player.

In any case, there was certainly insufficient political support; coalition allies were lukewarm and most of the country was strongly against the war. The result was the improbable linking of arms between nuns and no-globals, former anti-clericals and cardinals plus a good sprinkling of secular and moderates of all colours, much like in the rest of Europe and some of the US.

As it turned out, Italian intervention in the post-war occupation was far more bloody than anyone had dared predict. Nineteen carabinieri, soldiers and civilians died in a suicide bomb attack in Nasiriya in November. It was also a surprise to see how the Italian tricolour appeared at windows almost as much as the rainbow peace flag had in the previous months. Often the two flags flew from the same balcony. Previously non-nationalistic Italians discovered the patria. It was a moment high on emotion and patriotism but low on debate as to what the forces are doing in Iraq.

Obviously, Iraq is not a problem which is going to go away; the debate will, or may, begin when the mandate to keep the troops deployed comes up for renewal or if there are more deaths. A year ago, Iraq looked like a political minefield for Berlusconi but despite the real bomb in Nasiriya, he has managed to avoid any political responsibility.

Not so with the EU Presidency; there the furbizia brought few prizes and to tell you the truth, apart from the final Intergovernmental Conference in Brussels last month, the problem was not slyness. On the contrary, once again Mr. Berlusconi showed how seriously he is affected by foot-in-mouth disease. His outburst at the very beginning when he called the German MEP Martin Schulz a kapò has been replayed endlessly since then by delighted tv editors (apart from in Italy, of course). Deputy prime minister Gianfranco Fini was sitting next him at the time and his expression of despairing embarassment says more than any words.

His diplomacy was personal as ever, disturbing enough for a democracy like Italy, relatively powerful in its own right but downright improper for the EU. Once again, he defended his friend Valdimir, suggesting that Russian action in Chechnya was the right policy. Turkey too where Berlusconi was the honoured guest at the Prime Minister’s daughter’s wedding, was given unconditioned commitment. Ditto Isreal’s decision to build the fence. Pity that the EU’s position (and even the US’s for the fence) is highly critical on all these issues.

In the final IGC, Berlusconi promised he would pull a compromise out of the hat at the last minute and save the EU’s draft Constitution. But as a British MEP told the BBC “All Silvio Berlusconi had up his sleeve was a gelato-stained napkin with a few bad jokes scribbled on it”. Chris Patten was even more damning in his reasonableness “A fiasco but not a disaster”. Another anonymous participant said it was the worst-prepared summit that anyone could remember as Mr. B. put on on his “cheeky chappie” air and suggested that they should talk about lighter topics, such as "football and women” (BBC NEWS | Europe | Italy's chaos-prone EU pr... ).

The Italian Presidency is over but the tussles with the EU are bound to continue for all of 2004. Some will be over matters of substance, from milk subsidies to how much support the government can give ailing Italian companies. The more headline-grabbing fights will be between Berlusconi and Romano Prodi as Spring’s European Parliamentary elections approach.

Prodi himself is playing Sisyphus once again as he tries to bring the sniping elements of the Olive Tree Alliance into shape ready for this years Euro elections and Italian elections in 2006 or before when he would like to see himself Prime Minister once again.

The present incumbent told his end of year (two hour, live on prime time) press conference that he was the most popular head of government in Europe and that he would be around in government after the next elections and in politics for another 10 to 15 years.

He’s probably not wrong… unless.

There are a few unlesses but none seem imminent.

There are the rumours about his health but for the moment they are just that, rumours.

Sometime soon in the new year the Constitutional Court will give its verdict on the Immunity Law passed in June to prevent Berlusconi’s trial for bribing a judge from proceeding while he is Prime Minister. If they hold that the law is unconstitutional, then the trial will start again and would certainly reach a verdict within the year. But he has already said that he would not resign even if found guilty. It is after all the trial at first instance and the appeal would take years.

After all that has happened in the Berlusconi era, to have a Prime Minister found guilty of bribery might not even surprise us.

He will have to deal with the Gasparri media bill, turned down by President Ciampi last month. It would have saved his Rete 4 channel (instead a stop-gap decree was passed just before Christmas allowing Rete 4 to continue broadcasting terrestrially for another months) and given him the possibility of expanding his media holdings into print. The alternatives are either a climbdown or a clash with the President, neither very attractive options.

Finally there is the economy; in general, slumbering, with crises like the Parmalat scandal exploding with alarming frequency. This is the real risk for Mr. Berlusconi. Local and EU elections will give us an idea or how serious that risk is but either way, he will not step down.

With all this and a fair chance of Papal conclave, it does not look as if 2004 is going to be boring either.

Next week: “Crying over split milk” and other Parmalat puns.

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