Will Italy go back to Berlusconi?

The spectre of another Italian election and added European political uncertainty is looming, but with an added twist about the re-emergence of former prime minister Silvio Berlusconi.

It seems that once written off politicians do have seven charmed lives after all. Markets had reacted negatively to news in December that the major political parties in Italy agreed to hold a general election on March 4, 2018, little more than a mere three months away.

Investors fear the likely uncertainty after the vote, with polls pointing to a hung Parliament, more political instability, and the possibility of a new election shortly thereafter adding to European woes following Spanish regional and Austrian national election shocks.

While an inconclusive outcome is certainly possible, some analysts believe the elections are far more likely to ultimately lead to a coalition government with its political centre of gravity firmly anchored in the centre – along the lines of the 2013 Italian elections.

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The precise political leanings of this coalition will depend on how well the center-right and center-left perform relative to one another, but at this point it seems fair to say the centre-right has a decisive advantage, with former prime minister Silvio Berlusconi’s Forza Italia – according to some private polls – projected to win almost 20 percent of the votes. Will the old man of Italian politics make a comeback?

The centre-left 5Star Movement is nevertheless likely to be the first party, which will feed uncertainty in markets, but as things stand it would still be beaten by a center-right alliance between Berlusconi’s Forza Italia, the Northern League, and the extreme right Brothers of Italy, now polling at a combined 36 percent against the 5Star’s 28 percent.

That means the centre-right, under the shadow of a resuscitated Berlusconi, and not the 5Stars, will have first shot at forming a government.

Combined center-right

But since analysts expect even a combined center-right to come close to winning an absolute majority, talks with the centre-left Democratic Party (PD) will also likely be needed, which will put current Prime Minister Paolo Gentiloni as a leading contender for the Premiership in the event of a grand deal.

This is the crunch for a possible period of political uncertainty in Italy, with manoeuvring of coalition partners. Other leading contenders for Prime Minister should a grand coalition be formed include Economy Minister Carlo Calenda, currently in charge of some critical economic dossiers, and European Parliament President Antonio Tajani.

Berlusconi may prefer for Tajani to remain in Brussels to assuage EU fears of a center-right government that is likely to include the more populist and Eurosceptic Northern League. Pointedly, Northern League leader Matteo Salvini has talked a lot about leaving the Eurozone, though it is fair to say his party has already shown, during its last tenure in government between 2001 and 2006, that it usually barks more than it bites.

Berlusconi is also said to have hinted that he thinks he could become prime minister himself if the centre-right coalition were to win an absolute majority. But given that his ban from public office only expires in 2019, even in the event of a clean victory of the centre-right – which is highly unlikely – his shot at the premiership is close to zero.

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Political sources do point out that a judgement by the European Court of Human Rights on Berlusconi’s public office ban is expected to come out in May or June of next year. The colorful and fun loving tycoon might be tempted to flip the tables if the ruling were to come out favourable to him, but some doubt that even that would not be enough to push him back to head of state.

On the other side of the aisle, former prime minister Matteo Renzi’s center-left PD is currently in third place, behind 5SM and FI, polling at around 23 percent, and unlikely to catch up.

The PD has been shattered by a scandal related to covert efforts by Undersecretary to the Prime Ministry Maria Elena Boschi, Renzi’s close political ally and personal friend, to devise a bailout of Banca Etruria, whose senior management included her father.

Given the above, the coming Italian elections should at least add a bit of spice and intrigue compared to more dull European political affairs. For this we have to thank ‘bunga -bunga’ Berlusconi.
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Dr. Mohamed Ramady is an energy economist and geo political expert on the GCC and former Professor at King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia and co author of ‘OPEC in a Post Shale world – where to next?’. His latest book is on ‘Saudi Aramco 2030: Post IPO challenges’.