Time to go

Italian Prime Minister Silvio Berlusconi has until now been an artist in the craft of political survival. He has ruled longer than any other government chief since the end of World War II. Since his third electoral victory in 2008, he has won around 50 votes of confidence. Now Berlusconi, who has also squirmed free of numerous judicial procedures, is tied to the worries of the financial markets.

After almost a decade of stagnation, high unemployment and a mountainous public debt burden, investors are buying fewer and fewer Italian bonds. The costs for new Italian debt have reached record-high levels. Even the European Union and the International Monetary Fund have lost confidence in Berlusconi's ability to push through necessary reforms in a timely manner. They're sending their own inspectors to Rome. For the proud and cavalier Berlusconi, this is a deep embarrassment.

Had Berlusconi elected to cling on, it could have cost the Italian taxpayer some 26 billion euros ($35.8 billion) in additional interest payments over the next three years, according to estimates by a Brussels-based political think tank. And that would have meant greater expenses for the rest of Europe as well, as the European Central Bank continues to purchase Italian bonds to ease the financial crisis.

Berlusconi held onto power not just because he is vain and self-serving, but also because his office offers him legal protection from zealous state prosecutors and magistrates. The public perception of Berlusconi has long been severely damaged by his alleged sexual affairs and his mercurial politics. Within Italy he has lost a series of regional elections, and hundreds of thousands have protested against his policies and his very own person.

Abandoned by the middle class

Silvio Berlusconi, who with his investment firm and media empire is one of the richest men in Italy, has had an unparalleled political career. In the 1990s, the successful businessman entered the world of politics, mobilized support and won elections. The streetwise tactician dismissed criticism of his cooperation with post-fascist groups. He followed his nose for political power.

For a long time, he could count on the support of middle-class Italians. His friends from the business sector recently dropped their support of him because he had no definitive answer to Italy's debt crisis. Berlusconi's comment from the last G-20 summit - that Italians were doing fine because restaurants are full every night - was the last straw. The man seemed to have lost touch with reality.

Berlusconi only intends to step down when the latest austerity package clears parliament, perhaps next week. The reasons for this piecemeal resignation are known only to him. He should have given way immediately, in order to permit a new start straight away. Hopefully, he's not betting that the cost-cutting measures will fail to get past parliament - allowing him to muddle through for a few more weeks, only to eventually announce that he's indispensable after all, and that he will remain prime minister.

And what comes after Berlusconi? At the moment, Italy can't afford to hold snap elections. It has no time for that. Financial markets and the EU are demanding that the Italian government pass the necessary savings plans that Berlusconi himself has called for. The last thing Italy needs is an election campaign with a political standstill.

The opposition parties on the left are not able to present anyone with majority support in parliament. So there remains only the "Greek" style solution: to form a transitional government led by a more-or-less neutral technocrat. When the markets calm down and interest rates for Italian bonds subside, new elections could follow next year or in 2013. That's not exactly democratic, but it's pure necessity.

One thing is for certain: Italy must help itself. The debt burden of the third-largest economy in the eurozone is so great that no bailout fund ever constructed by the EU would cover it. Italy's economy is sound enough for the country to help itself, if it can only be governed in the right way.

Author: Bernd Riegert / acb, msh
Editor: Michael Lawton