Italian politics: Back from the dead?

An election win, but Silvio Berlusconi is still in political trouble

RARELY can a politician have had such cause to thank his doctor. Umberto Scapagnini, one of several doctors who attend Italy's prime minister, Silvio Berlusconi, scored a remarkable win in Catania this week when he was re-elected mayor. Catania is the biggest of 38 towns in Sicily where elections were held. Three days before the vote, Mr Scapagnini and other pro-government candidates were dealt a huge blow when news emerged that Italy was in recession for the second time in two years. Italy's poor performance was all the more striking because German GDP posted its biggest quarterly rise in four years.

The Italian media promptly decided that the poll in Catania was a test that could decide Mr Berlusconi's fate. Mr Scapagnini was personally linked to the prime minister, who spent two days campaigning in the city. That just made the eventual victory all the sweeter. Mr Berlusconi may now have enough authority to end squabbling among his allies and struggle through to the end of the parliamentary term next spring.

Yet he is still wounded and limping. Few Italians may fret over the stream of corruption allegations levelled at him, or over the clash of interests between his roles as businessman and politician. But they certainly care about money. Indeed, the reason they handed power to Mr Berlusconi four years ago was that he convinced them he could use his entrepreneurial genius to revive the economy.

Now, with just one year to go before the election, his government has cut its growth forecast for the second time in a month. The finance minister, Domenico Siniscalco, says he is looking for only 0.6%, and does not rule out zero. Since 2001, Italy has slipped to become the least competitive country in the euro area; it comes 47th in a global ranking compiled by the World Economic Forum.

One reason for this poor record is that desperately needed reforms have only recently been begun. Mr Berlusconi's government devoted much of the first half of its five-year term to legislation to favour his personal or business interests. It has since invested huge amounts of parliamentary time in a constitutional reform of dubious necessity, to satisfy the Northern League. By contrast, Germany's Chancellor Gerhard Schroder was lining up reforms, albeit timid ones, over two years ago.

The other reason for Italy's waning competitiveness is that the country remains so hostile to liberalisation. It is still protectionist, socially conservative, hostile to meritocracy and ridden with cronyism, tolerant of corruption, prey to organised crime and hamstrung by informal, invisible cartels. A look at any recent figures shows just how dire the situation has become. According to the World Bank, it takes $3,796 and 13 days to set up a business in Italy, compared with $306 and eight days in France, hardly a bastion of free-market thinking. An international study has found that bank charges for the average Italian account-holder are the highest in Europe. For what it is worth, Italy has proportionately fewer researchers than Portugal, and half as many graduates between the ages of 25 and 34 as Greece. It will take more than Mr Berlusconi's removal to put right such deep-seated woes.

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