Tuesday, 8 November 2011

Berlusconi is finished - for real this time

This blog has predicted the imminent resignation of Italian prime minister Silvio Berlusconi many times. In fact I counted, and in the past six years the blog claimed on five separate occasions that his sex and corruption scandals were about to topple him. After all it was hard to believe that a leader facing the kind of allegations he has faced could have held on to power. But this is Italy, and the normal rules don't apply.

But now it seems that the markets have accomplished what common decency couldn't - they have forced Silvio Berlusconi out of power. Tonight the Italian leader announced he will step down.

Rumours to this effect were swirling yesterday, causing European markets to rally and the euro's value to shoot up. But then Berlusoni issued a denial of the rumours on his Facebook page (where else?) and the markets tumbled. This was a clear sign: the markets had lost any shred of faith in Berlusconi to implement the reforms he promised European leaders last month. Berlusconi has survived many things, but when it came to the all-powerful markets that seem to be calling the shots these days, he was no match.

It is the end of an era for Italy, which has been ruled by the Italian media baron for 17 years save a brief sting out of power in 2006. His method of departure was fitting for a man who controls almost all of Italy's private media as well as its public media. He told his own Canale 5 television station in a dramatic announcement last night that he would step down after the parliament votes through his budgetary reforms later this month, calling an early election. His term was due to end in 2013.

So what happens next? Berlusconi made his announcement just after European stock markets had closed. But the announcement caused the US markets to rally and caused the Euro to rise against the dollar. Tomorrow as the European markets open they may rally on the news that he has resigned, as they did when there were rumours to that effect yesterday. But what will they do after that? Berlusconi has no clear successor - there is a political vacuum in Italy which has allowed him to stay in power despite his egregious behavior. A drawn-out and uncertain election could spook the markets and cause them to pounce on Italian yields.

But Italian president Giorgio Napolitano is thought to favour forming a 'national unity' provisional government similar to what has just been formed in Greece with the resignation of the Greek prime minister. It is thought markets would be pleased with this solution and would back off.

But this would mean four countries in the EU would then have provisional caretaker governments rather than elected governments - Greece, Italy, Slovakia and - let's not forget - Belgium. The fall of all of these governments except Belgium's was a result of the debt crisis. This would be a shocking state of affairs and would further add to the impression that it is the financial markets, not elected leaders, who are now running the show in Europe. And with elections coming in Spain shortly, there could soon be a fifth member state added to the list of countries that have abandoned democracy for technocrat administrations. It is an alarming situation.

Yet what other choice does Europe have? The political situation in these countries is so fractious that calling an election would cause huge uncertainty and cause the markets to panic. So the markets dictate unelected technocrat administrations must be formed to maintain certainty, or else they will instigate a global economic collapse by seizing upon Italian bonds.

Welcome to the age of marketocracy.

1 comment:

Anonymous said...

If he is that bad what are the Italians thinking when they vote for him.