The Final Curtain

Instead of thinking about the approaching summer break, Italian Prime Minister Silvio Berlusconi is facing what looks like a perfect storm. This time, the great survivor is very close to going under, but like most Italian dramas in politics and theater, this one will take time to unfold.

Nevertheless, amid growing national embarrassment about the prime minister’s political and personal shortcomings, the final act is beginning.

This weekend, Berlusconi’s closest ally, the leader of the separatist Northern League, Umberto Bossi, gave notice. To cries of "secession" from the crowd, Bossi told his followers that four important ministries should be moved to the north, taxes reduced, and Italian cooperation in NATO’s Libya operation stopped. Otherwise, he would pull the plug on the government. He gave Berlusconi until the end of the year to deliver. The other Northern League leader and Bossi’s probable successor, Roberto Maroni, attacked NATO, the judiciary, the Catholic Church (whose support Berlusconi needs if he is going to win any elections), and the government itself. Maroni is the interior minister, so he’s attacking from within the cabinet.

Why the seemingly strange outbursts? Bossi and Maroni want to put as much space between the Northern League and Berlusconi and his party, the People of Freedom (PdL), before actually killing the coalition.

Meanwhile, Rome’s mayor and the governor of Rome’s regional government, both Berlusconi supporters, threatened serious action if any ministries are moved, and southern PdL politicians are on the warpath. Berlusconi has some very serious bridge-building to do if he is going to keep his allies on board.

That was Sunday, June 19. This week, Finance Minister Giulio Tremonti will unveil his 40 billion-euro budget and plans to balance Italy’s budget by 2014. The government survived one vote of confidence on Tuesday, and will have to face another on Wednesday. It will be a tense couple of days.

The economic situation is only adding to the tension. Italy’s economy has stagnated for 20 years, with growth rates that are lower than all comparable economies, but the country has managed to avoid the worst of the present recession until now. Last month, Standard and Poor’s reduced its rating, and now Moody’s is threatening the same. The European Union is having trouble getting the Greek bailout package through, and the last thing anyone wants is a run on confidence for Italy.

Tremonti has promised fiscal rigor, and both the markets and the European Central Bank know he can deliver. But Berlusconi desperately needs some financial leeway to regain his lost popularity. For 17 years, he has campaigned on lowering taxes while they have actually risen; now Italians want to see some action. Most Italians just grumble, but the Northern League can actually throw him out of office.

The Confindustria, the employers’ federation, should be the natural ally of a center-right government, but its president, Emma Marcegaglia, has been a stern critic instead. She wants the new budget as soon as possible, with cuts in taxes on wages and businesses to be made up if necessary with taxes on financial profits and increases in the value-added tax. The unions are also clamoring for spending policies that will encourage job creation. But Tremonti is all in for austerity. He says: "Rigorous fiscal policy is not optional. It is not temporary; it is not the result of negative economic short-term circumstances. It is ‘the’ necessary policy with no alternatives for the next few years."

Berlusconi is in a bind. If he fires Tremonti, as he would like to do, and starts spending, then he will be punished by the ratings agencies, the markets, and Europe — with the prospects of a Greek-style meltdown. If Tremonti goes ahead, the government and its leader will be even more unpopular with the voters.

Once again, Berlusconi has a lot of explaining to do — to the Italian people, international institutions, his allies. His trademark smiles and sunny optimism are no longer enough.

Another issue that will not go away is the war in Libya. Last week, outgoing U.S. Defense Secretary Robert Gates called on the Europeans to step up to the plate on NATO operations. A good part of the Italian government was against the intervention, and so is much of the country — some, including Berlusconi himself, because of personal and political links to the Libyan regime; some, like the Northern League, because they fear a tide of refugees fleeing the war; and most because Italy has a strong anti-war culture. Berlusconi thus finds himself trapped between his own domestic political allies and his perception of Italy’s foreign interests, as Libya is of more concern to Italy than to the other Europeans.

Compared with all these national and international issues, his personal matters seem almost insignificant — but not quite.

Utmost on Berlusconi’s mind is a high-profile bribery case in which the prime minister stands accused of paying English lawyer David Mills to perjure himself to protect the former’s business interests. This week saw Berlusconi in court in Milan, listening to the man who was supposed to explain why Mills had been paid $600,000; the witness instead said he knew nothing about it, leaving the prosecution’s argument intact. The trial will stop in January because of the statute of limitations, so it will probably not reach a verdict, but it will be wearing for the next six months.

As for his prostitution charges, the infamous Ruby case, Berlusconi joked with Israeli Prime Minister Benjamin Netanyahu last week that the picture behind their news conferences — a painting of Andrea Appiani’s "Parnassus" — was "the 1811 version of bunga-bunga." So far, Ruby has backed up the prime minister’s story that there was no sex between them, but the former 17-year-old dancer has once again changed lawyers, and some of the defendants are hinting they might turn state’s evidence rather than pretend that Berlusconi’s parties were "polite and elegant dinners." Meanwhile, the prime minister continues to host parties with dozens of young girls to the desperation of even his most ardent followers. (Berlusconi’s dalliances with young women cost him very little electorally, but they have a devastating effect on Italy’s image abroad.)

All this comes after the May local-election defeats in Milan and Naples, where Berlusconi miscalculated badly on his aims and campaigning, followed by a defeat in this month’s referendums, where he again showed that he has lost his touch. He looks pretty awful too, tired and with layers of pancake makeup visible. But even if this storm does in the end blow him away, we have learned enough about Berlusconi the politician to know that he will not go down without a fight.