Election 2008: Berlusconi Handed Third Victory by Disillusioned Italian Voters

Silvio Berlusconi's centre-right coalition has emerged as the clear winner of Italy's general election, held on Sunday and Monday (13 and 14 April), in which voter turnout stood at a high 80%. Berlusconi's People of Freedom (PDL) won 47.3% of the vote, which translates into 168 seats in the Senate (the upper chamber of parliament), 10 seats more than is needed for an absolute majority—a rather impressive achievement considering the highly flawed electoral system still in place, which was widely blamed for the razor-thin majority that destabilised the previous centre-left coalition government led by Romano Prodi. The PDL, by wining the Senate majority, was automatically awarded 340 of the 630 seats in the Chamber of Deputies (the lower house of parliament). Berlusconi's biggest challenger—the centre-left Democratic Party (DP) led by former Rome mayor Walter Veltroni, who has already conceded defeat—won 38% of the vote, giving it 130 seats in the upper chamber and 239 seats in the lower house. The only other party to secure seats in the Senate was the centre-based coalition led primarily by Pierferdinando Casini's Union of Democratic Christians and the Centre (UDC), which won nearly 5.7% of the vote, or three seats, while it managed to win 36 seats in the Chamber of Deputies. The remaining parties that had been presented on the electoral lists, including Communists and Greens in the recently created Rainbow Left party, failed to win enough votes to pass the Senate threshold. This was a result of a pre-election decision by both Berlusconi and Veltroni to avoid entering into coalition agreements with smaller parties in a bid to avoid being held hostage by a plethora of interests.

It had been widely expected that Berlusconi would be elected prime minister for a third time (he previously served in the post between April 1994 and January 1995 and from 2001 to 2006, when he became the only prime minister to have served a full term since the end of the Second World War), but Italy's future remains rather murky. It is uncertain whether Berlusconi will once again focus on self-preservation or will instead go against precedent and address the country's serious structural deficiencies and widespread corruption.

Economic Decline and Political Deadlock

Berlusconi secured re-election by promising to revive an economy that is flirting with recession and to overhaul the severely deadlocked political system. His ability to implement the much-needed economic reforms is questionable, not only because of Berlusconi himself but also because of two parties included in the PDL coalition, the right-wing National Alliance (AN) and the populist Northern League (NL) of Umberto Bossi, which doubled its vote to 8%. Both parties are highly protectionist and are likely to be averse to the structural reforms Italy so desperately needs. However, Bossi has been quick to state that he will not hold Berlusconi hostage and that the parties will pursue their joint agendas. Regardless, concerns have been raised not only over the ability of the NL to halt economic reforms, but also over the possibility that it could use its relative importance in the coalition government to push through strict anti-immigration laws and inspire legislation that would lead to a more federal system favouring the prosperous north at the cost of the agrarian south. A better indication of the impact that these coalition partners will have on Berlusconi's policy priorities will be provided once the new government is unveiled next week. On the political front, after winning a clear majority in the Senate Berlusconi will be able to rather convincingly claim that electoral reform is not needed since he has demonstrated that the law itself was not the root of the recent political deadlock that brought Italy's political system practically to its knees.

The PDL was careful not to make too many promises in the run-up to the election since Berlusconi and the electorate were both fully aware that Italy's current economic woes cannot support any grand spending plans or dramatic tax cuts. However, it is uncertain if Berlusconi will be able to deliver on even the moderate promises made during campaigning considering that the previous administration issued a GDP growth forecast for this year of just 0.6%, while the International Monetary Fund (IMF) has a forecast of just 0.3%. Furthermore, he is set to inherit a rapidly rising budget deficit, which will make it difficult for Berlusconi to fulfil his election pledges to reduce income tax, housing tax, corporate tax, and value-added tax (VAT), as well as lowering tax revenues as a proportion of GDP to 40%. Furthermore, the PDL has also promised to raise state pensions and provide subsidies to young couples and low earners, as well as vowing to improve the employment outlook for Italy's youth. Finally, 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 (US$1.1 trillion)-worth of public property. However, Berlusconi’s commitment to these policies can already be questioned. He has announced that his economy minister will once again be Giulio Tremonti. Tremonti was largely responsible for the deterioration in public finances during Berlusconi's previous time in office, which left the country with a budget deficit equal to 4.4% of GDP, while he was also criticised for providing frequent amnesties to tax dodgers.

Other, more immediate challenges facing Berlusconi will be the sale or liquidation of the almost bankrupt national carrier Alitalia, which will likely create a large number of redundancies in northern Italy—the stronger half of Italy's economy. He will also be tasked with finding a solution to the chronic disparities between the north and south of the country in terms of economic prosperity, as well as overseeing attempts to combat the entrenchment of the south in corruption and Mafia domination, a situation perfectly exemplified by the ongoing Naples waste-management crisis, to which there is no end in sight (see Italy - Europe: 16 January 2008: EU Threatens to Fine Italy over Waste Crisis).

Outlook and Implications

Berlusconi has been a controversial figure in Italy and abroad since he burst onto the political scene in 1994. He is the only prime minister to have served a full five-year term since the Second World War, providing Italy with unprecedented stability; however, the cost of that stability was rather high. The economy was left in a dire situation and he frequently abused his position to make legal changes that protected him and his business interests from a long list of charges, including tax fraud, embezzlement, and bribery.

The ailing Italian economy needs reforming; however, it is uncertain if Berlusconi is the right man for the job. The reforms that need to be passed in order to revive Italy's flagging economic growth and dwindling competitiveness are the same ones that Berlusconi vowed to enact last time but failed to introduce despite his parliamentary majority and a full term in office. It also remains to be seen how long Berlusconi stays in power. Speculation has been rife that he is looking to hand over the reins after three years to someone within his coalition government—a similar arrangement to that which saw U.K. Prime Minister Gordon Brown take over from Tony Blair mid-term. The reason for this exchange of power would be to allow Berlusconi to run for president in the next election, which is due to be held in 2012.

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