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Thursday, March 07, 2013

Q&A: The 'Berlusconi paradox'

Silvio Berlusconi has just been sentenced to one year in prison in the so-called BNL-Unipol trial. We thought a short Q&A could be useful for those of you who don't follow Italian politics on a daily basis.

What was Berlusconi accused of?

Berlusconi was accused of leaking a wiretap phone call between centre-left politician Piero Fassino (currently serving as Mayor of Turin) and the then head of Italian insurer Unipol Giovanni Consorte to Il Giornale, a daily newspaper owned by Berlusconi's brother Paolo. Italian prosecutors had seized the wiretap as evidence in a separate investigation, so its disclosure was strictly forbidden.

Will Berlusconi go to prison?

Unlikely, for at least three reasons. First, he can still appeal against today's ruling twice - and the sentence can't be executed until the two appeals are exhausted. Second, the charges against Berlusconi (in this specific trial) will 'time out' at some point during the summer under Italy's statute of limitations. Third, Berlusconi turns 77 this year - meaning he may already be too old to go to prison anyway.

What's the impact of the ruling on Berlusconi's political career?

None, at least for now. Today's verdict does not involve any ban on taking public office and, again, has yet to be confirmed pending two separate appeals. Under Italian law, presumption of innocence remains valid until then (and rightly so).

So what's the significance of the ruling?

The ruling remains significant because the possibility of re-run elections in Italy is still on the table, and Berlusconi is also facing two more verdicts by the end of the month (including over the infamous 'Rubygate' affair). Having said that, though, remember Il Cavaliere was sentenced to four years in prison in a separate trial over allegations of tax fraud a couple of months before the elections, and yet, somewhat extraordinarily, over 7 million Italians chose to vote for his party anyway.


Rik said...

There is not much of a paradox. You only need to beat the opposition that is in front of you.
And the mainstream parties in Italy and simply worse than poor.
Look at the present situation:
-Monti carrying an undemocratic stigma;
-The Socialists dropping their austerity issue (THE main campaigning issue) within a week. Next to being totally uncredible because of this people basically expected such a move. And it is a strategical miss as well. A new election is still very likley and you just broke your electionpromises on the main issue. That surely will get you reelected,not. They are in the peoiple's eyes as corrupt as the rest. And with a leader that make Van Rompuy look charismatic.

Not much as opposition.
The opposition make themselves look pretty weak by using mainly rather far sought things to attack him via the criminal justice systerm iso in the political arena. Makes them look weak.

The Italian electorate simply isnot ready for the necessary chance they are still in denial and in defensive mode. Basically they like to get rid of the corrupt system, but not of the advantages it gives them personally. That is not going to work. But it creates a climate in which everything can happen. And Berlusconi looks to be the only one that has some understanding of marketing. They miss the oportunity of Monti giving them an optimal starting position in a haircut talk. Running away from the Euro is only possible without much damage when no borrowing is needed anymore. And primary surplus will not do the job as 80% of the interest constitutes income for other Italians and will simply drop GDP and tax revenue at the same time. You need to compensate for that.

jon livesey said...

In all the talk about the recent Italian election, one thing gets mentioned quite casually that is in fact rather astonishing.

There is a lot of discussion about the freedom of action any new Italian Government would have. After all, people say, if Italy does not persist with the austerity program, the ECB could threaten to stop helping Banks to buy Italian sovereign debt, or could exclude Italy from any future OMT.

To me, this is a bit astonishing since austerity is a political measure. We even expect national Parliaments to be the ones who put austerity policies into place.

So an ECB threat not to support Italy amounts to the ECB taking an explicitly political role in the euro-zone and acting, in effect, as the core countries' "enforcer".

Can anyone imagine Carney taking over at the BoE and announcing that unless the Coalition followed this and that policy the BoE would no longer buy Gilts?

I think we have drifted into a situation where the ECB has become a political actor, and that this wasn't what was originally intended.

Rollo said...

Hard to understand your comment that the ECB was not intended to be political. That was its entire intention, to faciltate and force if needed, ever closer union. Every body involved in the EU has that singular aim, regardless of the wishes of the people.

Rik said...

This is comparable to a treaty if a government signs the treaty basically every following government is bound to it.
Similar if your bank grants you a loan and subsequently it gets other shareholders.
It is the only way a lot of international agreements can work and are effectively possible. Otherwise it is we have an agreement until our parliament cancels it. Simply not good enough for the other party.
Similar as well to joining Nato, a next government can get involved in a war because of earlier commitments.

The ECB has moved to far into political territory. But this has mainly to do what sort of collateral they accept. At present that situation looks also rather stretched. However Italy taking unilaterally measures that makes it a worse debtor can simply affect the risk associated with certain assets and make them not longer accepted as collateral. Basically normal CB stuff, of course it also has a political dimension in this case, but everything does.

OMT is also a programm imho that already crossed the border. To make it look somewhat better it is linked/conditional on having a bail out plan in place. Italy can accept what it wants only it will have to bear the consequences that if it goes too far there will be no bail out and subsequently no OMT.

BOE and ECB are different CBs. One is basically part of one country )BOE) the ECB serves 17 masters. With therefor limited mandate and having to consider mainly the interest of the 16 others iso that of a particular single country. It cannot support Italy at the expense of the 16 others. Which is basically the Berlusconi case. The problem was imho it simply got way to active in that by eg writing a letter with demands.

I agree that the ECB has become a political actor and that that is not desirable, but your examples are not the right ones.

Freedom Lover said...

Best of luck, Silvio! You're the Man!

jon livesey said...

I don't think anyone has adequately answered my point about the ECB, or possibly even understood it.

On the first point, Draghi himself wrote in Die Zeit, back in August of last year:

"The ECB will do what is necessary to ensure price stability. It will remain independent. And it will always act within the limits of its mandate," the Italian wrote. "The ECB is not a political institution."

I don't think that you can get more explicit than that in denying a political role for the ECB.

And note the phrase "limits of its mandate". We are today well beyond the limits of the ECB's mandate, unless, of course, you just say its mandate is whatever Draghi wants to do.

And no, I don't think that the BoE being the CB of one country and the ECB of several is relevant in the slightest.

In the US, for example, you can imagine Congress leaning on one of the States to adopt a particular political policy, but I would find it very hard to imagine Bernanke telling Governor Brown of California how to write the State's budget.

Oh, and on a point of logic. I am pointing out that the ECB has *become* political. The retort to that is not "of course it has".

The point I am making is that if the ECB has been forced to become a political actor, then we have uncovered yet another defect in a common currency that lacks a real political actor in the form of common fiscal governance.

In other words, the ECB has started to play to role of a missing euro-zone institution.

Amaury said...

Can somebody tell me who is the author of the picture of Berlusconi please?
Thank you!