The old man and the sick man

Tuesday, April 15

Centre-right leader Silvio Berlusconi yesterday won a third term as prime minister.

Economic challenges. The government has a five-year term ahead of it. Berlusconi, at 71, might not want to continue beyond the present parliament. He can, if his health holds, choose the moment of his departure to groom a successor from within his party, Forza Italia. However, the immediate problems he faces are much more economic than political. Yet, he has little freedom of manoeuvre on the economy, where despite falling growth and consumer and business expectations, inflation remains stubbornly persistent, and where the pressures on public expenditure will increase again as tax receipts fall:

• Protectionism? The election campaign did not reveal any clear differences between left and right on how to address Italy's underlying problem of declining international competitiveness. However, it did indicate that a centre-right government will add its voice in the EU to calls for protection. Moreover, Giulio Tremonti, likely to return as economy and finance minister, has been highly critical of the stance of the European Central Bank, and Italy will probably press for more leeway in addressing its budget deficit.
• Alitalia. An early indication of this will come with the new government's attitude to the intractable problem of Alitalia, which teeters on the verge of bankruptcy. Should the new government impose a 'national' solution, instead of the proposed takeover by Air France-KLM, it will probably bring the Italian authorities into conflict with the EU.