Italy's Crisis Has Premier Riding High
RACHEL DONADIO
ROME — This month, as markets plummeted and investors panicked, Italy's billionaire prime minister, Silvio Berlusconi, watched shares in some of his own companies nose-dive 40 percent. Yet he seemed buoyant as ever, reveling until dawn at a disco in Milan after returning from a meeting with European leaders on how to tackle the financial crisis.
"If I sleep for three hours, I still have enough energy to make love for another three," the newspaper La Repubblica quoted him as telling the younger crowd. "I hope that when you hit 70, you're in as good shape as I am."
Beyond the theatrics and locker-room humor for which Italy both loves and hates him, the remark reflected a reality: Mr. Berlusconi, 72, is riding high, his power and influence greater than ever. The reason: this man with an already unparalleled position at the center of the nation's economy and politics now stands to control billions of dollars in public money to bail out private companies should they need it, and they probably will.
This further expansion of Mr. Berlusconi's power, which some here attack as dangerous and others hail as necessary in difficult times, bears out a common saying here: there are two kinds of Italians, those who work for Berlusconi and those who are about to.
Mr. Berlusconi "influences the economy, which needs the state now," said Stefano Folli, a political commentator. "If it needs the state, it needs him."
This new economic power comes at a time when Mr. Berlusconi is enjoying more political power than he has ever had in 15 years in public office.
It also puts him, along with Prime Minister Gordon Brown of Britain, hailed for his bank bailout plan, among the world leaders whose political fortunes seemed to be getting a boost from the crisis. Losers appear to be President Bush, whose already low poll ratings have sunk further amid the financial turmoil, and Prime Minister Vladimir V. Putin of Russia, which has been buffeted by plunging oil prices and an international backlash over its war with Georgia in August.
In Parliament, Mr. Berlusconi's center-right coalition, the People of Liberty, was elected in April by a wide nine-point margin. It is stronger than ever, having shed some smaller rightist parties, and governs practically unopposed, because of the implosion of the left in the elections. Over the weekend, the main opposition group, the Democratic Party, split with an allied centrist party, Italy of Values, further splintering the ever-squabbling left and center.
"This is a phase in which he's without rivals," said Ferruccio de Bortoli, the editor in chief of the well-respected financial newspaper Il Sole 24 Ore. "Whether it's good for the country, I have my doubts."
The Italian state has always been a major player in an economy in which personal connections are crucial. And in recent weeks, Italy, like most European countries, has been open to bailing out failing financial institutions. But when the head of government is also the most powerful businessman, and one of the wealthiest, in the private sector, it has the potential to take the spoils system to a new level.
In many countries, the leader's popularity often rises and falls with the state of the economy. That does not appear to be the case in Italy.
Since Sept. 1, the Milan stock market has dropped 22 percent and economic anxieties are rising along with interest rates on mortgages. But Mr. Berlusconi's approval ratings are high at 62 percent, according to a poll released last week and conducted by the center-left La Repubblica.
His left-wing critics, including the Democratic Party leader, Walter Veltroni, have attributed his success to his sway on the public and private television airwaves. Mr. Berlusconi owns Mediaset, Italy's largest private broadcaster. A government media watchdog recently reported "an imbalance" on television public affairs programs in September, with far more time devoted to the government than to the opposition.
Even though Mr. Berlusconi has said the Italian economy is not in a recession, a view many dispute, on Tuesday he called a meeting next week with banks and Confindustria, the industrialists' association, to make sure, as he said, "that the financial crisis doesn't affect the real economy."
Over all, he seems to have reassured Italians that the state has their back.
Mr. Berlusconi has also tried to promote investment in his own way.
This month, he drew criticism for urging Italians to buy shares in Eni and Enel, Italy's largest gas companies. For a prime minister to favor certain stocks "was an evident conflict of interest," said Emma Bonino, vice president of the Senate and a member of the Radical Party.
Yet Mr. Berlusconi's powerful finance minister, Giulio Tremonti, is well respected and even seen as predicting the current crisis in his book, "Fear and Hope," which appeared this spring and warned of the downside of globalization. Last week, he said the government was prepared to bail out banks on a case-by-case basis.
But worry about the power of Mr. Berlusconi and his government is high enough that on Monday Mr. Tremonti sought to play down fears of more state intervention. He said the government would approach any bailouts reluctantly, saying they could be "seriously harmful" to the country's "political health."
"It may be necessary, but it is absolutely not an opportunity," he said.
Mr. Tremonti also has a strong hand with the parties in the center-right coalition and helped push through some budget measures over the summer, giving the government more flexibility in the current crisis. Budget negotiations usually paralyze Parliament all fall.
But not everyone is convinced.
For all Mr. Tremonti's foresight, "the budget was wrong because it presupposed growth," said Pier Luigi Bersani, the shadow finance minister for the Democrats. On Tuesday, the International Monetary Fund predicted two years of recession for Italy. Last week, Confindustria predicted that the Italian economy would shrink by 0.5 percent, instead of growing 0.4 percent.
It is hard to gauge how much Mr. Berlusconi's empire has lost. His holding company, Fininvest, which is not publicly traded, announced Tuesday that its net profit had fallen 20 percent this year. Shares in Mediaset have fallen 40 percent since the first of the year, while Mondadori, a publishing house, is down nearly half. Shares in Mediolanum, an insurance company, were down about 40 percent.
But in broad terms, Mr. Berlusconi has solidified his position in Italy's economy, the world's seventh largest.
His daughter Marina now sits on the board of Mediobanca, the storied Milan investment bank that for decades was a counterbalance to state financing and a bastion of old money to his new.
Mr. Berlusconi recently warned that Italian companies were open to hostile takeovers, and he hopes to pass a law making them more difficult. His critics fear such a law would reduce foreign investment, keeping power in the hands of a homegrown few.
"Hostile to whom?" the left-leaning economist Tito Boeri asked in a front-page article in La Repubblica on Friday. "Hostile to our economy or to the big families that now run Italian capitalism?"
And as the credit crisis deepens, Mr. Berlusconi is also moving closer to the country's two leading investment banks, Unicredit and Intesa Sanpaolo, whose leaders have not been close to the center-right coalition.
At Mr. Berlusconi's behest, the chief executive of Intesa Sanpaolo, Corrado Passera, worked with the government to engineer the recent bailout of the airline Alitalia. Mr. Berlusconi had pledged during his election campaign to keep the flagship carrier Italian, which meant nationalizing the airline's losses while trading favors to get private investors to buy a major stake.
Unicredit's shares have plummeted in recent weeks, but it has so far avoided the need for help from the state. Last week, the government of Libya bought a 5 percent stake, becoming the bank's second largest shareholder.
If private recapitalization fails and Unicredit turns to Mr. Berlusconi for state financing, it would wind up "reducing the independence of these very important banks that had previously been out of his grasp," said Michele Polo, an economics professor at Bocconi University in Milan.
Is all this power for Mr. Berlusconi good for the country?
"My immediate response is yes," said Alberto Bombassei, vice president of Confindustria. "In difficult moments it's good for the country to have a more decisive government."
Beyond the economic uncertainty, Mr. Berlusconi, who seems to enjoy life on the precipice, still remains vulnerable. He is on trial in absentia in Milan, accused of concealing illegal accounts. Italy's constitutional court is reviewing a law that would grant him immunity.
Paolo Bonaiuti, Mr. Berlusconi's spokesman, said reports of the prime minister's increased power were overstated. "He has the support of the public," Mr. Bonaiuti said. "What's the problem?"