Silvio Berlusconi pleasing the locusts?

Friday, July 15 2011. Silvio Berlusconi and his ministers manage to get an emergency budget approved, hope the “speculator locusts” will like it (certainly none of his allies will).

Silvio

Another nail in Berlusconi's (political) coffin? It surely is. Italy history's second largest emergency package (and the quickest one) won't make many people happy. If someone thought that Berlusconi was going to get rid of IRAP (a local tax on manufacturing activities), well they will be disappointed, because – so -far – the government decided to increased its rate, instead. Did North League's Umberto Bossi expect an improvement on fiscal federalism? Not this time, the Italian regions will get less money.

Did anybody expect a serious cut in MPs expenses? The topic was amended by Berlusconi's Freedom Party, so there won't be any reductions in their wages or in their multimillion euro perks.

But Berlusconi will say it'a all Giulio Tremonti's fault, the only minister who's lacking "team spirit" (as the prime minister declared in an interview a week ago).

Giulio

The rules in the package are the same old ones: getting money from the car owners (a surcharge on vehicle excise duty for cars with an engine of 225 kW or more), from the tourists (10 euro tax in Rome), from the sick men (surcharge on health services). Money from the increase of the fuel excise – another evergreen way to (at least try to) balance the books in Italy – was already collected in July to finance the costs of the emergency on immigrants and to fund the show business.

All this, made the Italian way: the package is worth 47 billion euros, but the bulk of 40 billions is going to be “collected” in 2013 and 2014, saying “who knows who will be in charge by then”.

Silvio Berlusconi, the conjurer

Sunday, June 19 2011. 40 thousand supporters of the Northern League gathered in the small town of Pontida to demand tax cuts, whilst Italy's public debt is expected to top 120 per cent of GDP by the end of the year. And Silvio Berlusconi needs to find a way to sort both hassles out: pleasing his ally whilst keeping the commitments taken with the European Union

Northern League's supporters in Pontida

The Northern League (NL) became a crucial ally of Silvio Berlusconi's PdL (People of Freedom party), since former heir apparent Gianfranco Fini left – slamming the door – to form a new party, called Futuro e Libertà per l'Italia (Future and Freedom for Italy).

Bossi, member of the Senate of Italy

But the recent political defeats both in local elections and in national referendum showed Berlusconi's power waning and – consequently – Northern League enthusiasm and loyalty flagging. A poll indicates that 55% of the league's voters disapproved the performance of the Berlusconi's government.

As the greenish NL supporters crowds gathered in Pontida (it's an annual tradition), singing the praises of the secession (a recurring topic of Northern League popularism), Umberto Bossi – who's still the Commander in Chief of the Northern Italy's party – promised that he will extort at least three things from Berlusconi: substantial tax cuts (as a condition of continued support for the government), the move of three Ministries to Northern Italy (even though Gianni Alemanno, PDL's mayor of Rome, warned of a “hard, serious” tussle to defend the capital's privileges) and the end of the support to the anti-Gaddafi war in Libya.

Tremonti and Berlusconi

“Dear Berlusconi,” Bossi barked into the microphone, “your leadership is at risk in the next elections if you don't make some changes.”. But he seemed to be particularly displeased with Giulio Tremonti, the Minister of Economy and Finance, who has done “shameful things”, according to senator Bossi. A scandal. The thing is that Tremonti insists on fiscal rigour, saying he doesn't want to end up like the Greeks did, and he is soon expected to present a three-year austerity plan, which needs to find additional savings of some €40bn (£35.7bn) to reach the goal of balancing the government’s budget by 2014.

Possibly another “shameful thing”, in the eyes of the Northern League's boss, but there remains the danger of Mr Tremonti resigning if his hand is forced, a loss that would be likely to alarm markets.

Rome's mayor Alemanno (left)

In a nutshell: Berlusconi has to give the Northern League a bone, but that would mean to increase Italian deficit and debt (which is the second biggest in Europe, after Greece's troublesome one) and/or quarrel with Rome's mayor Alemanno and/or renounce to Giulio Tremonti's services and/or...

In the past Berlusconi managed to get out of any kind of situation, but this time it seems only a conjurer can sort this mess out.

Silvio Berlusconi, the European Central Bank and Thomas More

Tuesday, June 16 2011. Silvio Berlusconi's game to assure Mario Draghi post as governor of the ECB is not is not progressing as the Italian prime minister planned.

Sarkozy and Berlusconi

The rules of the game are easy. Mario Draghi – former governor of Banca d'Italia – goes to Frankfurt, and takes his place as governor of the European Central Bank, replacing the Frenchman Jean-Claude Trichet. Berlusconi managed to get Sarkozy's endorsement (even though he'd prefer a Frenchman in that post), but – in exchange – the Italian prime minister has to make sure that there be no more than one Italian in the board and France should maintain one, replacing Jean-Claude Trichet.

That means that incumbent European Central Bank Executive Board member Lorenzo Bini Smaghi must go. Berlusconi had a 10-minute chat with Bini Smaghi, at Palazzo Chigi, the government’s headquarters in Rome, explaining him these very simple directions.

But Italian Silvio's mojo – as most of us already know – is not at his best, and Bini Smaghi has decided to dig in his heels. After the (one-way) discussion with the Italian prime minister, the board member went to the Vatican and “spoke of Thomas More” who “followed his conscience, even at the cost of displeasing the sovereign”. Saint Thomas More is the patron saint of central bankers.

Battling with Thomas More will be a tough task for the declining Silvio.