The Last Days of the Emperor – Berlusconi Plays His Last Card

posted by Geoff Andrews at Saturday, November 05, 2011

5 November

At times during the G20 summit in Cannes, Silvio Berlusconi looked the most relaxed of all the world leaders, smiling and joking and mingling with his counterparts, seemingly undeterred by the crisis escalating around him. At previous gatherings, his flamboyant attempts to deflect attention from problems at home have resulted in inappropriate comments about female political leaders, keeping Angela Merkel waiting, and comparing a German Social Democrat MP to a Nazi Commandant. Yet, this G20 summit illustrated the growing isolation of the beleaguered Italian premier . Even at home, some of his trusted allies are deserting him.

Watching the decline of Berlusconi’s government feels like witnessing the last days of an emperor. It has been said that the Roman Emperor Nero 'fiddled while Rome burned' and some might say the same of Berlusconi. As the crisis has intensified, he has become more entrenched and determined to hold on to power, while all the time more deluded in his statements, as in his claim that the Italian economy was fine because the restaurants were full. In the days ahead we can expect rancour and counter-attacks from those still around him, as he attempts to cling on to power. Italy’s economic future, meanwhile, is more in jeopardy by the hour.

His Finance Minister Giulio Tremonti, who has been at odds with his leader over fiscal reform for months, refused to be committed when asked if Italy needed a new government to carry through the reforms that have been agreed in consultation with EU allies and now to be monitored by the IMF. Even loyal allies, who have depended on Berlusconi’s patronage for years, released a statement calling for a new leader. Given previous crises, Berlusconi’s response that they will come back on board cannot be dismissed, but his long-term survival hopes are now remote

Of course, as we have seen many times in countless confidence votes and government crises, the ‘malcontents’ among his allies can be bought one way or another and thus far have not been able to sustain any significant challenge. Even Gianfranco Fini, his former number two, was not able to defeat Berlusconi over a crucial confidence last December. For all Umberto Bossi’s loud rhetoric and hyperbole, he has so far held back from withdrawing support for the government, as he did to bring down the first Berlusconi government in 1994.

However, this time it is different. This is because the main challenge has come not from Italy’s timid opposition or servile courtesans, but from external allies. Moreover, whereas in the past his international criticism has had little effect on his domestic standing to an electorate less bothered by his trials and sex scandals than their immediate economic needs, this occasion is likely to be decisive. Two weeks ago the gentle smirk and sneer from the ‘Merkozy’ had more impact than several years of opposition. Now, the prospect of being monitored by the IMF will be a constraint too far for Berlusconi.

His public statement that he had refused an IMF loan was a desperate last attempt to convince his own people that he remained in control, that he was not ceding sovereignty and that he was in tune with international opinion. In fact these were hollow words, given that the European Central Bank has been bankrolling Italy since August. However, the contrast between his words and those of Christine Lagarde, the IMF’s managing director, is hugely significant. According to Lagarde, it was the ‘lack of credibility’ in Italy’s proposed austerity measures for tackling its rising debt levels that was the problem. Berlusconi’s attempt to present the IMF loan as routine company audit was typical of his ‘salesman’ rather than ‘statesmanlike’ solution. The rapid fall of the Italian markets to the news of the IMF monitoring decision suggest that the ‘ lack of credibility’ will not be addressed until his departure.

As we will see over the coming days, IMF quarterly monitoring represents a commitment to fiscal reform that goes beyond not only his government but also that of the official opposition. It remains to be seen whether Italy’s political class as a whole is up to dealing with the severity of the current situation and the possibility of a national unity government, possibly led by ex-European Commissioner Mario Monti, is still the likeliest outcome. For Berlusconi however, attention will soon switch to his exit strategy, which is likely to prove another story in itself.