Italian Job: What’s behind the Berlusconi/Tremonti feud?

Italian Job: What’s behind the Berlusconi/Tremonti feud?

When your country is on the ropes amid widespread fears that the economy is headed in the same direction as Greece, it’s probably not the wisest time to intensify a feud with your finance minister — the man many economists believe is the only thing standing between the Italian financial system and disaster. Yet that’s exactly what the irascible Italian prime minister, Silvio Berlusconi, is doing. On Friday, he called Giulio Tremonti “the only minister who is not a team player” and added “he thinks he’s a genius and everyone else is stupid.”

“I put up with him because I’ve known him for a long time and one has to accept the way he is,” Berlusconi told the Italian paper La Repubblica (ironically, one of the few not owned by him).

There is widespread speculation that Tremonti could be forced out of office. He backs a tough fiscal line — largely unpopular with voters and other cabinet members — and last week, was able to push through a €47 billion austerity program that Parliament is debating this week. Berlusconi said he would fight to change the package before parliament passes it — which he derisively called, “Tremonti’s plan.” The prime minister wants to make it more attractive to the electorate rather than markets, he told La Repubblica

But the possibility that Tremonti might be forced out is making rating agencies and markets nervous, analysts say.

Not that anyone argues that Tremonti isn’t a bit of a pain in the rear. The former tax lawyer is reported to be uncompromising, aggressive, and hard to get along with — he has said of himself that he’s the only advisor willing to say no to the prime minister. In the past, Tremonti been quick to threaten resignation when he doesn’t get his way (and has actually resigned before, only to come back). He also plays politics, of a sort, leveraging support among economists and fiscal conservatives to get others to compromise. And he’s certainly cultivated the image that he alone is the man who can save the economy — listen to him or face disaster. No wonder Berlusconi isn’t a fan.

It also probably doesn’t help that commentators keep referring to Tremonti as a potential successor to the prime minister, should his many scandals force him to resign.

But Tremonti now has a scandal of his own. The finance minister is under investigation for allegedly taking an apartment worth €8,000 per month for free from one of his closest allies in Parliament.

The controversy has been stoked by Berlusconi’s media empire. “Tremonti’s free flat,” read the front page headline of Il Giornale. The paper also said Tremonti’s position is weaker than it has been in years and called him a die-hard “socialist,” who has repeatedly blocked Berlusconi’s attempts to implement tax cuts.

What comes next depends largely on Parliament. Tremonti today said the austerity measure under debate will be passed by Friday. That would be a major coup for the finance minister — though his battle with Berlusconi won’t go away. The prime minister is stuck between a scary economic outlook and an angered electorate. Continuing to attack Giulio Tremonti may be his most convenient escape for now — regardless of what it does to the economy.