Markets in Italy are freaking out today, mainly because of the pronouncement of one man, Silvio Berlusconi. The former Prime Minister plans to run for office yet another time, and Mario Monti, the current caretaker leader, has resigned, setting up new elections probably in February.
It’s true that Berlusconi, who was basically chased out of his leadership position by the international community in ways that the Italian law enforcement community could never accomplish, would not win the election based on current polling. His People of Liberty party obtains only 14-18% of the vote, compared to 30-38% for the center-left Democratic Party. There’s a third party populist movement known as Five Star which could win as much as 20% of the vote, and so any ruling coalition would have to be pretty broad.
But this polling doesn’t necessarily mean that Berlusconi has no chance, and that’s probably why the markets have seized up in the country. First of all, he’s still the richest man in Italy, someone who has defied expectations again and again. Plus, he’s likely to run on a populist, anti-austerity platform, specifically against the economic reforms of his predecessor, Mario Monti. That has the potential to be fairly powerful, if recent electoral history in Europe can be believed. Like the Greek elections, I would expect the European leadership to demonize Berlusconi as a precursor to instability and an exit from the Euro and whatever pain and suffering they can lard on from there. Unlike the Greek elections, the party being demonized will have the wherewithal to fight back.
I hardly hold any brief for Berlusconi, a corrupt tyrant who has been bilking the Italian public for well over a decade now. Alexander Stille’s book The Sack of Rome details this expertly. However, the fact that he was basically overturned by international bureaucrats in favor of an unelected member of their posse should not be lost here. Especially because that unelected bureaucrat, Mario Monti, did not really do that great a job if you look at key indicators