Reform in Italy: Can it be done?

Date: 20/09/03

Italy's right-of-centre government fizzles with initiatives, but the prime minister's awkward dual role of politician and businessman makes it hard to enact them

THE prime minister is his country's most successful company chairman and his ministers often sound like departmental heads, anxious to make sure the boss knows they are not sitting on their hands. Open any Italian newspaper or magazine these days and you are likely to find a Berlusconi minister talking about schemes for reform - the justice minister enthusing over leasing prisons, or the education minister explaining a plan for tax breaks for parents who send their children to private schools.

This week, the cabinet issued a blueprint for constitutional reform. To the opposition's consternation, it would enhance the prime minister's powers and trim the president's. But it also envisages a range of less controversial measures: a neater parliament of 612 members rather than the present 945, in which the two chambers would play different and apparently more complementary roles; more power to the regions, which would have more control over health, schools and local policing; and a special status for Rome.

The beginnings, then, of a real neo-liberal revolution in Italy? The next two-and-a-half years - the second half of Mr Berlusconi's term of government - will tell. Having fended off the possibility of a jail sentence, by getting parliament to pass a law granting him immunity from prosecution while in office, Mr Berlusconi can now concentrate his energy on reforming Italy.

But, however sincere his intention, he still labours under two handicaps. One is his coalition allies' different outlooks. The other is the enduring conflict of interest arising from his various roles, especially in the field of the media, which he dominates comprehensively. Of Italy's seven national television channels, his government can influence the three that fall within the embrace of RAI, the state broadcaster, while Mr Berlusconi's firm, Mediaset, owns the three main non-state channels.

So it is not surprising that the opposition, and quite a few MPs on his own side, balk at his government's main initiative in that area. A bill promoted by his communications minister, Maurizio Gasparri, would open the way to privatise RAI and bring in digital terrestrial television. Mr Gasparri insists his bill is a purely liberal reform to give viewers a wider choice.

If it were not for Mr Berlusconi's position as Italy's biggest media magnate by far, the opposition would probably have taken him at his word while merely harrying him over the details. Instead, it sees his bill as a plot to grab the airwaves for Mediaset and its allies. So the opposition is doing everything in its power to dish it.

Or take justice. Many Italians with no axe to grind have long felt that Italy's legal structure needs reform. Prosecutors and judges belong to one career structure, defence lawyers to another - a system that hardly bolsters a presumption of innocence. But as soon as Mr Berlusconi or one of his team moots the separation of judges and prosecutors, there is an outcry because of the suspicion that he is trying to nobble two professions that have repeatedly given him grief. So reform is blocked.

Or take pensions, widely regarded as the litmus test of Mr Berlusconi's will to change Italy. One of the keys to relieving the state of its current vast burden (state pensions gobble up 15% of GDP) is the phasing in of private schemes. Yet, there again, Mr Berlusconi cannot preach reform without appearing to sponsor his own interests: his vast business empire includes Mediolanum, a large insurance group that provides private pensions.

Conflicts of interest apart, Mr Berlusconi's supporters have profoundly contrasting outlooks. The biggest group, after his own Forza Italia (Go, Italy!) party, is the post-fascist National Alliance, which still harks back to a corporatist past, even though its leader, Gianfranco Fini, has edged steadily closer to a neo-liberal viewpoint. But many of his supporters are still wary of trimming the public sector. So is the coalition's small Union of Christian Democrats, a rump of the lot that used to run Italy.

In the case of pensions, the stoutest resistance has come from Umberto Bossi's once-separatist Northern League, the coalition's noisiest partner. Though it does not have the numbers in parliament to bring down the government, it holds the welfare ministry. Mr Berlusconi is said to be convinced that he needs the League's backing to survive. Many of its old supporters now vote for Forza Italia but, say pollsters, they might withdraw their support if Mr Bossi left the government.

Though ostensibly in favour of market reforms, the Northern League sings a very different tune when, for instance, they look like affecting what Mr Bossi calls “northern pensions”. Mr Berlusconi aims to raise the minimum retirement age. But northern workers tend to start regular employment earlier than in the rest of Italy, so have got used to retiring earlier.

The foot-draggers in the ruling coalition say that radical reform would play into the hands of Italy's trade-union leaders, who long to do Mr Berlusconi down. Union protests against Mr Berlusconi's pension-reform proposals put forward by his first government, in 1994, played a big part in its early downfall.

Small wonder that it took so long for the prime minister's allies to reach even an outline deal, earlier this month, on pension reform, or that the agreed changes were modest: no structural change before at least 2008 and, in the meantime, incentives to stay at work rather than penalties for retiring early.

Mr Berlusconi, the tycoon who turned politician, would like to go down in history as the man who modernised Italy at the start of the 21st century. But he lacks room for manoeuvre. That is partly because, in becoming a politician, he has never given up being a tycoon.