Italian job is up for grabs
With Italy's debts at €1.8tn, the country's controversial premier faces an uncertain future
As the eurozone crisis spreads to Italy, the pressure mounts on the country's embattled prime minister Silvio Berlusconi. Having survived numerous scandals that would have long since sunk most other political leaders, will the bond markets finally fell the one-time cruise ship crooner?
The week just ended has been the scariest in the 12-and-a-half year history of the European single currency. After festering on the fringes of the eurozone for almost three years the crisis spread to Italy, the third largest economy in the single currency. Italy is, after the US and Japan, the third most indebted nation on earth with total debts of €1.8trn, the equivalent of 120pc of GDP.
With the markets now more worried about the solvency of Italy and Spain, the Greek crisis, which had dominated the headlines for most of the spring and early summer, now seems almost irrelevant.
Ever since the eurozone financial crisis first erupted in the autumn of 2008 most analysts reckoned that, after first devouring the smaller peripheral countries such as Portugal, Greece and Ireland, the crisis would then spread to Spain.
Except that, as often happens in crises of this sort, things didn't quite work out as expected. Instead of the crisis spreading to Spain first, it spread to both Spain and Italy. This was the eurozone's worst nightmare come through with its third and fourth-largest economies staring into the abyss.
However, while the eurozone has serious structural problems, these have been compounded in Italy's case by that country's own deep-rooted flaws. Despite having been politically united 150 years ago Italy remains a badly divided country with deep regional and political fault lines.
These divisions are perhaps best-illustrated by the quotation attributed to Count Cavour, the Piedmontese statesman who went on to become the first prime minister of Italy. Informed by an aide that the revolutionary leader Garibaldi had united Italy, Cavour supposedly replied that: "No, he has divided Africa".
Despite a century-and-a-half of political unity these divisions still run as deep as ever. Italy remains split between prosperous northern and central regions and an impoverished south. The writ of the Italian state still runs very imperfectly over large swathes of the so-called mezzogiorno with criminal gangs -- the Mafia in Sicily, the Camorra in Naples and the 'Ndrangheta in Calabria -- exercising de facto local control.
Superimposed on these regional fault lines are equally deep political divisions between left and right. Italy is still living with the consequences of the events of 1940 to 1948. In June 1940, with France defeated and Britain also apparently beaten, Mussolini's comic-opera Fascist dictatorship joined the war on the German side in the hope of easy pickings.
However, instead of the hoped-for bloodless victories, Italy suffered the most catastrophic defeat in its history. By July 1943, having been stripped of its African empire and with the western allies after conquering Sicily, most Italians had had enough. Mussolini was sacked by King Emmanuel III and Italy declared war on Germany two months later.
Unfortunately the Germans had anticipated the Italian switch and occupied the northern two-thirds of the country with the result that the allies spent the following 20 months doggedly fighting their way up the Italian peninsula in what was a bloody and destructive war.
Just as damaging was the civil war raging behind the front line between the partisans, who were composed largely but not exclusively of communists and socialists, and the fascists who were supported by their German "allies".
Although they made a major contribution to the allied cause, the partisans were denied the fruits of their victory. In the 1948 general election the new centre-right Christian Democrat party, a partnership of Catholics, ex-fascists and former royalists which was enthusiastically supported by an unholy alliance of the Vatican, the CIA and the Mafia, narrowly defeated the communists and socialists.
The Christian Democrats were continuously in power from 1948 to 1994, when the party dissolved in a welter of corruption allegations. When the party finally disappeared in 1994 a huge gap opened up on the right of Italian politics.
Enter Silvio Berlusconi. His Forza Italia party filled the void created by the demise of the Christian Democrats and he has since served three terms as prime minister, making him Italy's longest-serving post-war leader.
Even in 1994 Berlusconi was already a controversial figure with his Fininvest controlling Italy's largest commercial TV operator, its largest publisher, its largest advertising agency and several newspapers. A native of Milan, Berlusconi started out as a small-scale property developer in the 1960s. Then in 1970 he began work on the huge Milano 2 project which included 10,500 apartments. How Berlusconi managed to fund this enormous development has never been adequately explained.
The success of Milano 2 provided Berlusconi with the firepower he needed to expand into the media sector. In the early 1970s Italian TV was totally dominated by the state-owned RAI broadcaster. Following a court ruling allowing local, privately-owned TV stations, Berlusconi surreptitiously built up a rival national TV network and he now owns three national TV channels.
Berlusconi has been dogged by allegations of corruption throughout his career. Indeed his decision to enter national politics in 1994 was at least partially motivated by a desire to limit the scope of some of the judicial investigations into his business activities. Since becoming prime minister for the first time in that year three sets of charges against him have been dropped as a result of legal changes introduced by his governments.
Among these legal changes were shortening the time period allowed to prosecute various white-collar crimes and making false accounting a criminal offence only if an injured party reports it to the authorities.
However, almost as fast as Berlusconi can dispose of old charges, new ones keep popping up. While some of the current crop of charges -- which include allegations of bribing senators supporting the previous government of Romano Prodi to switch sides, and of making payments to British lawyer David Mills in return for favourable testimony in a case involving Berlusconi -- are water off a duck's back for a seasoned campaigner such as Berlusconi, far more serious is the recent charge that he paid an underage prostitute for sex.
The Vatican, a long-time Berlusconi supporter, has discreetly backed away as the tawdry details of his private life have become public. His second wife filed for divorce in 2009, accusing him of "consorting with minors".
The thought of the 74-year-old Berlusconi, who has had extensive plastic surgery and hair implants, cavorting with teenage girls is both aesthetically and morally repulsive. One feels that the term "dirty old man" could have been invented specifically with him in mind.
As the pressure mounted, Berlusconi announ- ced earlier this month that he would not stand for re-election in 2013 when his current term as prime minister is due to expire. But will he last until 2013?
With Berlusconi at daggers drawn with his finance minister Giulio Tremonti, who this week rammed a €47bn austerity package through parliament despite the prime minister's best efforts to sabotage it, the odds on his surviving in office for another two years must be considered slight.
The eurozone financial crisis has already cost one former Taoiseach and the Portuguese prime minister their jobs. Berlusconi looks like being the next one to go.