Tuesday, October 30, 2012

Is Berlusconi - in spite of his shady reputation - contemplating a move back into politics?

Silvio Berlusconi has been a supporter of Monti's government until recently. But there is a possibility the former Prime Minister may decide to re-enter politics once again. This is particularly troubling, not only due to the risk of Berlusconi rolling back Monti's austerity measures but also because the man is a crook - there simply isn't another way to put it. On Friday he was convicted of tax fraud by a court in Milan. OK, that happens to a politician or two. But this is not the first time for Mr. Berlusconi.
WSJ: - This is Mr. Berlusconi's fifth conviction since 1990, though so far he's managed to avoid his sentences for alleged perjury, corruption and false accounting, thanks to amnesty laws, successful appeals and expired statutes of limitations. Friday's sentence has already been reduced to one year, and despite the verdict, he won't set a foot in jail until his lawyers exhaust Italy's appeal process, which could take years. Even if the expected appeal fails, the proceedings may well let Mr. Berlusconi run out the statute of limitations on tax fraud.
He has also been pulled into another trial that involves his relationship with an underage woman - which of course he denies. What's amazing however is that in spite of all this, Mr. Berlusconi could in fact garner enough political support to run in the next election. And he can do it by tapping into the public's disillusion with current conditions in Italy. The prolonged recession (see discussion), austerity measures, higher taxes (and more enforcement of tax evasion laws), high fuel prices, nearly 11% unemployment rate, etc. makes for some unhappy voters. This unease among the Italian population is evidenced by the latest consumer data. Consumer confidence has declined sharply since last year.

Source: tradingeconomics.com

And with it went consumer spending and retail PMI (released today). Consumer expenditure has been worse than the lows of 2008-09.

Source: Markit

This increases the risk of potential troubles for Mario Monti's government and his supporters, particularly as Berlusconi - after his conviction last week - threatened to pull support for Monti's government. Berlusconi is in effect blaming Monti for somehow not allowing him to cheat on his taxes.
Chicago Tribune: - The election for a regional government in Sicily is a major test ahead of a national poll in April but the picture has been confused by Berlusconi's threat at the weekend to pull support from Prime Minister Mario Monti and bring down his government before an election expected in April.
Berlusconi's angry attack on Monti's technocrat government, which his center-right People of Freedom (PDL) group has supported in parliament for almost a year, underscored the political confusion ahead of next year's national vote.

The billionaire former prime minister, convicted of tax fraud last week, attacked Monti's austerity policies on Saturday, announcing that the PDL may withdraw its support and bring the government down.
Mr. Berlusconi has been also known to make jabs at Monti before this attack, insinuating that the Prime Minister is a puppet of Germany or is controlled by bankers. This rift has split the main center-right party People of Freedom (PDL) into Berlusconi's and Monti's supporters. With Monti not expected to run in the next election, Berlusconi could potentially make a move. Whatever the case, next year's elections in Italy will be critical, as Monti's efforts to put the government on a fiscally sustainable path (that finally gave Italy some credibility) could easily be reversed, threatening the recent signs of stability in the Eruzone.

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