Italy’s Elections: Can Berlusconi Win After His Bunga Bunga Shenanigans?

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Berlusconi Feb 2013 2
Silvio Berlusconi

The Italian electorate has been very magnanimous to former Prime Minister Silvio Berlusconi. Despite the media tycoon’s penchant for tax fraud (convicted in 2012), illegal political financing (convicted in 1997, after he was prime minister the first time), and women of questionable legal status -- he is currently a defendant in a trial focusing on paying a minor for sex -- his people have been so kind as to put him and his center-right Forza Italia and People of Freedom (Il Popolo della Libertà) parties into power three times.

But he may not get so lucky this time, when Italy goes to the polls on Feb. 24 and 25 to elect a new parliament. The Italian media is not allowed to report polling the week before an election, as it is viewed as election tampering, but the latest polls, taken Feb. 8, show the center-left Democratic Party led by Pierluigi Bersani winning between 32 and 42 percent of the seats, and Berlusconi's center-right coalition taking between 25 and 34 percent. No one is expected to win a clear 51 percent majority.

Berlusconi is still facing legal proceedings in four ongoing trials, including the one in which he is accused of paying alleged prostitute "Ruby the Heart Stealer," a Moroccan immigrant named Karima el-Mahroug, for sex, and for abusing his office in bailing her out of jail when she was arrested on a shoplifting charge.

“It’s a mixed bag at the end of the day,” predicted James Lindsay, senior vice president at the Council on Foreign Relations. “The Democratic Party is favored in the polls, and is expected to take a plurality of seats, but it will not take a majority of seats.” Lindsay also predicted that whoever wins a plurality will have difficulty putting a coalition government together.

This election in particular is expected to showcase Italy's political and economic woes. 

“The backdrop to the Italian elections is an economy that is at historic highs in terms of unemployment, close to 13 percent, and perceptions that politicians are corrupt,” Lindsay said in a conversation with Robert McMahon, the editor of CFR.org, last week. “There’s considerable unrest politically … because of tough economic times and a sense that politicians aren’t able to master events.”

However, the expected outcomes of parliamentary elections aren’t always the actual outcomes. And according to some economists, if by chance Berlusconi’s party pulls off a plurality, the economic woes that Italians are hoping to correct may become much worse very quickly.

Ben May, an economist at Capital Economics in London, said that Berlusconi’s track record does not inspire confidence in investors. “I think that the markets would see a victory for the centre-right as a negative development,” May said in an email, “and that would prompt a sell-off of Italian government bonds.”

Robert Khan, the Steven A. Tannenbaum Senior Fellow for International Economics at the Council on Foreign Relations, also predicted bad news for the economy should Berlusconi come out on top. “As of now, markets are expecting a center-left or center coalition that, while it may be fragile, would be market positive because it would signal a continuation of the reform effort,” Khan said also in an email. “It’s likely that this scenario [a Berlusconi win] would lead to an increase in Italian bond yields based on the uncertainty it would create.”

An increase in bond yields means that investors would be viewing the Italian economy as more unstable, and would therefore sell Italian bonds, causing their prices to decrease. A decrease in bond prices means a bond’s interest (its yield) rises, which in turn means the Italian government would have to pay out more money every year to people who hold its government bonds.

Daniel Gros, director of the Brussels-based Center for European Policy Studies, disagreed, and predicted that the market may actually remain fairly stable even if Berlusconi got back into power. “One can only guess at the likely market reaction,” Gros explained. “But my guess would be that the market's reaction will remain muted as Berlusconi has no interest in having a crisis back.  He will thus support a tight fiscal policy.” 

But, Gros added, Berlusconi does have his agendas. “All he is interested in is not to have problems with the courts and to put his friends in high places,” Gros wrote.

Even more damning that what Berlusconi could do to the economy is what he might try to do for himself. The septuagenarian is known to use his media and political positions in his favor.

“Berlusconi is in politics to look after his media and broader business interests, to give himself maximum influence over his various trials (through the media and as a parliamentarian and leader of a major party), and for his own personal and psychological drives,” wrote James Walston, a professor of political science at the American University in Rome. “If the PdL [Popolo della Libertà] is the second biggest party in Parliament, he will certainly use that position to reach some sort of deal."

Walston added that while no one can grant Berlusconi full-on immunity from prosecution, the president can pardon him if convicted, or make him a “life senator,” which confers a certain status and aura of untouchability. Parliament could also, Walston said, pass a law which would help him, as it has done in the past.

“There is no doubt that he will use whatever leverage the electorate gives him to achieve these aims,” Walston wrote, “but it will not be quite as simple as exchanging support for immunity. If he has the relative majority in either house, then he will be able to set the agenda.”

This is Berlusconi’s sixth campaign, but it is also the first time he has faced off against not just one adversary, the center-left coalition, but three. 

Besides current prime minister Mario Monti's Scelta Civica (Civic Choice) party, there is a populist party that may win an upset plurality. It's the Five Star Movement, a new party started by comedian Beppe Grillo, which is expected to do very well on a protest platform -- possibly becoming Italy's largest party -- after surprise performances in the 2010 regional and 2012 local elections. However, even though Grillo is head of the party, he is not running for prime minister, which means in the event Five Star comes out on top, Italy may still not have a chief of government. And in that event, if Silvio Berlusconi could muster a coalition, he may have a shot at becoming prime minister for the fourth time.

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