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Corriere della Sera - October 13th 2006
Lenin would be astonished. No, I don´t mean the real Lenin, asleep in his mausoleum in Red Square in Moscow. I am talking personally, as the man whose photo was featured on the front page of Il Giornale five years ago as evidence that The Economist, the British weekly of which I was chief editor, was in fact a communist publication. For what other explanation could there be for the fact that we had just described Silvio Berlusconi as "unfit to govern" Italy? At the time I took this use of my resemblance to Lenin as just a good joke, and thought this moment of notoriety would surely pass quickly. I did not imagine that this episode was the beginning of a new and always fascinating interest for me in Italy, a period of education that would culminate in my writing a regular column in an Italian newspaper. For that, I must say thank you to one man: Silvio Berlusconi.
Why? When you think about it now, it seems obvious. Il Cavaliere forced me to pay a very close personal attention to what we were writing and saying about him, since what we found in him was so exceptional and unusual for a rich, western democracy, and then because he sued us twice for defamation (the cases are still going on). But most important it forced me to ask how it was that Italy could have produced such a man as its prime minister, a man with conflicts of interest unique among government leaders in the rich democracies, a man who to me exemplified the dangers that arise when big business and government get too close to one another.
I am not sure that I have come anywhere near finding the answer. Many, much more expert people have tried before me, and will doubtless try in the future. But simply looking for explanations has been enormously interesting, and even enjoyable. Now, though, I am reminded, as I begin this column, of one important and not very pleasurable explanation. It is the state of the centre-left parties in Italian politics. They must take much of the responsibility for the Berlusconi phenomenon.
The reminder comes, of course, from the everyday workings of Romano Prodi´s coalition government. Mr Prodi has been brave in many ways, given the weakness of his parliamentary majority. I salute especially his government´s efforts to break down the barriers that restrain competition and block the arrival of new businesses in so many sectors in Italy, even if inevitably this liberalisation had to lead to compromises. Italy´s economic revitalisation will come only if governments succeed in removing the many barriers and rules that prevent the true creativity and enterprise of Italian businesses, big and small, from being expressed. So the Prodi government made a good start. But then it spoiled it with its budget, now being debated in parliament.
In macro-economic terms, this budget starts from a false premise. It assumes that the priority must be the reduction of the budget deficit, in order to meet the rules of the euro zone´s Stability and Growth Pact. When Mr Prodi was president of the European Commission he called this "the stupidity pact", and he was right. Italy´s economy is one of the weakest in the euro zone. Reducing the budget deficit, and hence domestic demand, will make it even weaker.
The right priority should not be the deficit but fiscal reform: changing the way in which taxes are raised and money is spent. But this budget, thanks to its focus on the deficit, will make things worse, not better. The trick the government has used to make his sums work is outrageous: taking severance funds into the public pension system and calling it revenue is a trick worthy of Enron. And the rise in income tax for higher earners is a retrograde step, against the trend in other European countries, and one made necessary by the concessions he has had to make to his left-wing partners and by the failure to reform government spending instead.
Tricks, concessions, "stupidity pact" budgets, divisiveness. Silvio Berlusconi has a lot to thank the centre-left for, both for his rise to power and now for his survival in politics. But I have to thank him, for the chance to write this column. Grazie, Silvio.
Reply by Romano Prodi: