Some question stability of an Italy controlled by Berlusconi

The counting had not even ended on Italy's regional elections two weeks ago before European commentators were once again asking themselves a familiar question. Namely, will Italy prove itself a reliable member of the euro under the leadership of media tycoon and centre-right opposition boss Silvio Berlusconi?

The emphatic nature of the centre-right's regional electoral victory would suggest that, barring unlikely miracles, Mr Berlusconi will win the next general election (probably next April). What is more, he will win it convincingly on a platform that brings together anti-immigration policies, tax cuts and hints of devolution for the rich north.

In times of "euro-crisis", such a scenario was enough to prompt unflattering comment, perhaps best summed up by the Financial Times: "European governments should make it clear that if Mr Berlusconi were to become Prime Minister again, he will not be allowed to carry out policies that would upset Italy's stability without serious reactions from the EU partners. "On an ethical point, Mr Berlusconi must choose between running for Prime Minister and his ownership of most of Italy's private sector television." While the New York Times made a disapproving reference to Mr Berlusconi's judicial problems, German economics Professor and government adviser Juergen Donges spoke mournfully of the lack of meaningful structural reform in Italy where "reform has gone backwards since the country qualified for the euro".

Nor is concern about the possible implications across the euro zone of a Berlusconi electoral success limited to media comment. Two months ago, German Chancellor Gerhard Schroder prompted angry reactions in Italy (from both the centre-left and centre-right) when he drew a parallel between the post-fascist Alleanza Nazionale and Joerg Haider's Freedom Party in Austria, arguing that if Mr Berlusconi's centre-right coalition containing "neo-fascists" were to take power, the EU should then intervene with Italy as it had done with Austria about Mr Haider.

Does the probable second coming of Mr Berlusconi really merit such concern? Is it not a gross exaggeration to suggest that his return to government could destabilise Italy and, this time, the rest of the euro zone along with it? Is Mr Berlusconi himself not correct when he claims that his centre-right government represents no more of a threat to euro zone stability than Spain's centre-right Popular Party, led by Jose-Maria Aznar?

Clearly, in this age of a strong dollar-dominated global economy, Italian stability (or lack of it) is not going to be the critical factor in determining the fate of the euro. European partners, however, are entitled to wonder what to expect from the return of Mr Berlusconi.

Significantly, Mr Berlusconi's regional electoral success was won with precisely the same coalition with which he swept to power in a whirlwind campaign in 1994, namely his own Forza Italia party plus the post-fascist Alleanza Nazionale and the Federalist Northern League. That coalition survived in office for only seven stormy months before Northern League leader, Senator Umberto Bossi, pulled the plug.

For the purposes of both the next general election and of the recent regional ones, Mr Berlusconi has reforged his alliance with Mr Bossi, thus putting behind them five years of consistent and mutual mud-slinging. Is a partnership with a man who used to refer to Mr Berlusconi as "Berlus-Kaiser" destined to last?

And if it does last, then at what price? An initial indication of the shape of things to come under the Bossi/Berlusconi alliance is their new immigration policy, unveiled during the regional campaign. This calls for strict new immigration quotas, tough prison sentences for those who smuggle in "boat people" and also the use of naval force, including the right to open fire, on smugglers in Italian territorial waters.

In the immediate aftermath of regional electoral success, Northern League exponents such as Senator Bossi and Roberto Maroni suggested that their longheld dream of an independent northern Italian state, free of oppressive taxes levied by corrupt and inefficient Rome, was a major step nearer.

One is entitled to ask to what extent the Bossi/Berlusconi alliance involves radical devolution to the fictional state of "Padania" invented by Mr Bossi. If it does involve such a devolution (including fiscal devolution and control over health, education and police services), what will be the effect on Italian stability, to say nothing of the cost to the Italian exchequer?

On the purely economic front, will a government likely to be elected on a platform of tax incentives (cuts) have the necessary political will to maintain the sort of new-found fiscal rigour that has marked the last five years of Italian public life, a rigour which forms a key part of membership of the euro?

There is also the conflict of interest problem. Again, media commentators are not the only ones to be worried by this issue.

Last month, Bank of Italy Governor Antonio Fazio appeared to point a finger at Mr Berlusconi when saying: "The seeking of personal gain and profit is incompatible with the carrying out of public functions."

Mr Berlusconi's huge personal wealth via his media-oriented Fininvest Group has, of course, also created legal problems for him. He has so far been convicted in three different trials, on charges of false accounting in December 1997, of illegal party financing in July 1998 and of bribery, also in July 1998. In the coming months, he will again be in court, this time charged with having bought judges in order to obtain favourable rulings relating to his purchase of the Mondadori publishing house.

Mr Berlusconi has always claimed that he is the victim of a political witch-hunt by leftist enemies and he has vigorously and consistently defended himself, availing of Italy's lenient appeals process. Even those with a short memory, however, will recall that the initial enquiries into his business affairs in 1994 contributed to his government's downfall.

Could it happen again? Could he again fall foul of judicial enquiries? If he does, it is possible that the rest of the European Union, rather than smiling quietly at the opera buffo nature of Italian politics, might begin to worry about the implications of socio-political instability in the euro's third-largest economy.