Italy’s chaotic politics. Taxing times

After the calm, the storm

FOR some months, predictions earlier this year of a fracture within Silvio Berlusconi's coalition had seemed misplaced. But after a week of acrimonious confusion bordering on outright chaos, it now seems they were just premature.

At the root of the government's problems lie two things: Italy's glum economy and Mr Berlusconi's pledge before coming to power in 2001 to cut income tax. The prime minister's legal battles - his trial in a judge-bribing case may produce a verdict against him in December - also keep dogging his government.

At a coalition “summit” on November 9th, ministers accepted that, with Italy's economy sluggish and the budget deficit up against the euro area's agreed ceilings, the money was not there for a tax giveaway. Instead it was agreed that income-tax cuts should be put off for a year. But, to show willing, it was also decided that the budget should include some €3.5 billion ($4.5 billion) in corporate-tax cuts and tax breaks for poor families. The deal opened the way for the former neo-fascist, Gianfranco Fini, to become Italy's foreign minister in place of Franco Frattini, who is replacing Rocco Buttiglione as Italy's European commissioner. But Mr Berlusconi was reluctant to let Mr Fini have the foreign ministry without getting something in return. Mr Fini is sceptical about tax cuts, and the prime minister wanted him to accept at least some.

That Mr Fini agreed to so few before becoming foreign minister was embarrassing enough for Mr Berlusconi. But, as details emerged of the spending cuts needed to contain Italy's deficit and pay for these modest tax cuts, pent-up tensions in the government burst out. The deputy finance minister, Gianfranco Micciche, responsible for development funds for the south, threatened to resign if they were cut. The Northern League, a junior coalition partner, hinted it would bring down the government if they were not.

As accusations and denials flew, it became increasingly hard to grasp what was in the budget. On November 15th teachers protested in Rome amid reports that education cuts would cost 14,000 jobs. The education minister, Letizia Moratti, dismissed the reports - only to discover that they were true, and to join the teachers in damning them as unacceptable. Mr Berlusconi himself raised tensions by telling colleagues he had not given up the struggle for income-tax cuts at the start of 2005.

Called to parliament to clarify the situation, the finance minister, Domenico Siniscalco, conceded that the tax cuts had “still, in part, to be defined within the government”. In the ensuing uproar, the opposition withdrew its amendments to the 2005 budget, saying it did not know what it was amending. The government followed suit. Bizarrely, the budget was then passed without further ado by the lower house. It now goes to the upper house.

The Northern League's leader, Umberto Bossi, still in hospital with heart problems, is now reportedly pessimistic about the government's chances of seeing out its term to 2006. He is not alone. The budget is exposing deep divisions in the coalition, between interventionists and neo-conservatives, and in the country, between a poor, dependent south and a rich, frustrated north. Above all, the frailty of the Italian economy - and how little was done in the early years of the Berlusconi government to reform it - is showing through ever more starkly.