On April 9, 2006, Italians will vote on Silvio Berlusconi's record as premier of Italy--and are expected to give a negative verdict. The likelihood is that a coalition of center-left and left-wing parties led by a former president of the European Commission, Romano Prodi, will take office, albeit with a slim majority. Whether Prodi will be able to govern effectively is another matter. The Union, as Prodi's coalition is named, consists of a dozen parties and includes former and actual communists along with socialists, liberals and Christian Democrats.

Who cares? "Political turmoil likely in Italy" is hardly a headline to set the pulse racing. Well, both the EU and the United States should care.

The United States should care because Italy, while scarcely an indispensable ally, has nevertheless been a steadfast friend of the United States in the past, most recently in Iraq and the War on Terror. A center-left government, despite the presence of Prodi himself and a number of other senior figures who are not anti-American, would probably be required for domestic political reasons to flirt with a Zapaterist line in foreign policy. This is because Prodi's majority will almost certainly depend for its survival on Rifondazione Comunista. Rifondazione's longtime leader, Fausto Bertinotti, proposes that Italy's broad foreign policy strategy should be an "activist" one that encourages "Europe" to scale down or even abandon military spending, "supersede" NATO and end the "military servitude" that "condemns free countries to be occupied by the military bases of other countries." Instead, Italy should redirect its energies towards aiding the Third World.

How much such views will directly impact Italy's relations with the United States is unclear. U.S. bases are probably at no risk of closure. What is certain is that a Union government will be less supportive of U.S. policy in the Middle East than Berlusconi has been. Prodi himself has more than once described the war in Iraq as a historic error. Over Iraq, the only question now is whether Italy retires its contingent by the end of 2006, as Berlusconi's defense minister, Antonio Martino, promised in late January, or whether Rifondazione and the Far Left will constrain a Prodi government to pull out at once as a gesture of disrespect for the American empire. Over Palestine and Iran, there is little chance of a Union government siding with a hard U.S. line. Both the stability of the government and the personal convictions of the Center Left's leadership rule this out.

The EU should care about a future center-left government and political turmoil in Italy because the country's public finances are in disarray. Neither Prodi's coalition nor the outgoing government has convincing ideas about how to get them back into shape. The Italian state today is rather like the overindebted U.S. homeowner: It is somehow making ends meet but will suffer like sin if lenders start demanding a higher return for their money. An Italy that opts to escape from the rubbing harness of permanent fiscal rigor by inflating its obligations away is not an unimaginable proposition, and it is one that alarms the European Central Bank and other EU governments.

There are, therefore, plenty of good reasons for thinking that Italy's coming election matters. Although Italy lives in a permanent state of high political fever, its crises do sometimes cease to be amusing comic opera for the rest of the world and become authentic foreign policy dilemmas. This happened in the 1970s, when the Communist Party became a de facto member of the government (and arguably kept the political system from falling apart), and in the early 1990s, when the postwar political establishment disintegrated in the wake of corruption investigations launched by district attorneys in Milan and dozens of other cities.

Two Contenders

Both Silvio Berlusconi and Romano Prodi emerged as national political leaders in the troubled context of the mid-1990s: the aftermath of the collapse of the parties (notably the Christian Democrats) that had ruled Italy for decades; and the rise of new forces such as the Lega Nord (Northern League), which called for the secession of the rich north from the Italian state.

In 1994 Berlusconi threw his media networks, organizational skills and money into the construction of a political movement, Forza Italia, that rapidly became the party of choice for much of the Italian middle class. But Forza Italia could only command the vote of at most 25-30 percent of the electorate. Berlusconi was thus required to find allies. His three main partners have been the Northern League, the post-fascist Alleanza Nazionale (National Alliance) and the Union of Christian Democratics (UDC). Running as the "House of Freedoms", these parties easily won the 2001 general elections.

Prodi emerged as the Center Left's antidote to Berlusconi in 1995. An economics professor from Bologna, but well-connected politically with the left wing of the Christian Democrats, he formed the Ulivo (Olive Tree) coalition as a rallying point around which liberals and Christian Democrats opposed to Berlusconi could cooperate with the Left Democrats, the heirs to the Italian Communist tradition and party apparatus. Thanks to an electoral pact with Rifondazione, the Ulivo won the April 1996 elections. The two years of Prodi's government were characterized by a program of fiscal rigor, privatization and supply-side reforms imposed by the then-treasury minister and current president of Italy, Carlo Azeglio Ciampi. The reforms squeezed Italy into the euro, but they cost Prodi dearly. Prodi was forced out in the fall of 1998 after Rifondazione rebelled against the government's austerity policies. Prodi became president of the EU Commission the year after.

Absence makes the heart grow fonder. Without Prodi, the Center Left, whether in government or in opposition, was unified only by a sterile "anti-Berlusconismo." Despite his less than stellar record in Brussels, Prodi's return to Italian politics in 2004 has reinvigorated the Center Left's self-confidence. In mid-October 2005 he was chosen as the leader of the Union by millions of ordinary citizens after a successful experiment with U.S.-style primaries. With the exception of Bertinotti, none of the Union's other big guns competed against him.

The Failings of Signor B

In a deeply conservative country like Italy, victories for the Left should be the exception rather than the rule. That Berlusconi risks losing is an indicator of how ineptly he has run the country since May 2001. It is a sign of the disenchantment with Berlusconi personally that Forza Italia is the only party in the ruling coalition that is expected to get fewer votes than in 2001 (opinion polls at the end of January gave it only 18 percent of the vote, down from 29 percent in 2001). The National Alliance, the Northern League and the UDC all seem likely to match or add to their 2001 tally.

There are five main reasons for the plunge in Berlusconi's popularity. First, his stance on the Iraq War has cost him the support of many Catholics. The Vatican's pacifism has been very influential on Italian public opinion since 9/11. The huge peace demonstrations that have flooded the piazze of Italy since the invasion of Iraq have not been composed entirely, or even principally, of rainbow-scarf-wearing America-bashers, although Berlusconi's media cheerleaders have pretended that they have. Berlusconi, not least because of the cringing lack of stature he shows in his dealings with President Bush, is widely regarded as America's poodle.

Second, Berlusconi is perceived by public opinion to have abused the office of prime minister. An inordinate amount of Parliament's time has been spent on legislation designed to protect Berlusconi and some of his closest collaborators from being sentenced in criminal prosecutions. Almost as much time was spent on a law regulating the media that many experts, not all of them political opponents, condemn as tailor-made for the prime minister's business interests.

Third, Berlusconi has not lived up to expectations as a leader. His spin doctors have always portrayed him as a decision-maker who is bringing entrepreneurial flair to the murky world of Italian politics. However, for most of the last five years he has cut a hapless figure as he has tried to mediate between the protagonists of the savage political quarrels that have marred his government. The leader of the UDC for much of this legislature, the Christian Democrat intellectual Marco Follini, once openly disparaged Berlusconi's role as coalition leader during a press conference chaired by the prime minister himself. The speaker of the Chamber of Deputies, Pier Ferdinando Casini, and the leader of the National Alliance, Gianfranco Fini, also have been burnishing their images at the expense of the premier. These personal rivalries have only succeeded in giving the electorate a fatal impression of rancor and lack of purpose.

Fourth, the public rhetoric of Berlusconi's coalition has been characterized by off-putting verbal stridency. The Lega Nord, in particular, has specialized in politically incorrect invective against Italy's growing Muslim community. In mid-February, a Lega minister, Roberto Calderoli, exposed on prime-time TV an undershirt decorated with the satirical cartoons of the Prophet Muhammad that have aroused such hostility across the Middle East. Calderoli's gesture provoked riots in Libya and the burning of the Italian consulate in Benghazi. The cartoons do, of course, raise important free speech issues. But Calderoli's crude provocation is symptomatic of a wider irresponsibility that has alienated many moderate voters from the House of Freedoms.

It's the Economy, Stupido

Last and most important of all, the Berlusconi government is perceived to have mismanaged the economy. Economic growth in Italy has been well below the EU average--no mean feat, given the EU's tepid record. The mountain of public debt has started to increase again (currently 108 percent of GDP). Standard & Poor's cut Italy's debt rating in 2004 and is likely to do so again this year. And a sheaf of reports by the EU, the OECD and the IMF have lambasted Italy for not doing more to liberalize its economy and get public spending under control. In 2001 Berlusconi promised to improve infrastructure with a large program of public works. But few projects have been approved, and one that has, a bridge connecting Sicily to the mainland, has "white elephant" written all over it. Italy has slid down all the principal league tables of international competitiveness (it ranks alongside Botswana according to the World Economic Forum) and is suffering from a severe brain drain as its best young researchers flee from a university system that has pockets of excellence but does not operate according to rich-world standards of academic merit.

The financial markets and the banking sector, meanwhile, are bywords for murky deals and closet national protectionism. In December the governor of the Bank of Italy, Antonio Fazio, belatedly resigned after judicial investigations began into his attempts to thwart an unwanted takeover of a prominent northern Italian bank by a Dutch rival. Unsurprisingly, foreigners are not beating down the doors to invest: For a $1.7 trillion economy, Italy attracts a derisory quantity of foreign direct investment.

In all fairness, Berlusconi cannot be blamed for most of these problems: They are the legacy of decades of poor public policy and of the contradictory attitude of the Italian electorate, which is angry at Italy's economic stagnation but which takes to the streets whenever painful remedies are suggested. Even so, the House of Freedoms could have done more since 2001. Berlusconi's government has kept the books in approximate balance only through amnesties for wealthy tax-cheats, not spending cuts. It flinched from allowing the basket-case state airline Alitalia to go under in 2004. It has introduced overdue measures of labor market reform (which have had an immediate and positive effect on the unemployment numbers) but has done little to liberalize the almost medieval guilds that control the various professions.

More generally, Berlusconi has evinced a public optimism about Italy's economic prospects that seems at odds with reality. Italians are rich, he repeats tirelessly. If there are problems, he avers, they are traceable to "Prodi's euro", which has raised the cost of living and reduced Italy's opportunity to revive the economy with deficit spending and cheap money like his caro amico George W. Bush has succeeded in doing in the United States.

It is precisely this kind of rhetoric that is alarming the rest of the EU. Does Berlusconi mean it? Surely he realizes that Italian sovereign debt, absent the euro, would be pulverized in the bond markets. The suspicion, however, is growing that fiscal prudence is an even more onerous burden for Italian populists than for American big government conservatives. Nothing in the government's record over the last five years suggests that a Berlusconi victory will lead to the sound management of Italy's public finances.

A Government that Governs

A center-left government may prove more adept at managing the public finances than a renewed center-right administration. But the personal and ideological jealousies dividing the Union's leadership are as disruptive as those splitting the Right. The two biggest parties in Prodi's coalition, the Left Democrats and Democracy and Liberty (known as the Margherita, after its electoral symbol, the daisy), never miss an opportunity to snipe at each another and steal electoral advantage. They are rivals, as well as partners. A project to fuse them into a single "Democrat" party capable of getting over 30 percent of the vote has met sturdy opposition inside both parties for this reason, though Prodi would like it to happen. It may yet occur.

Both the Margherita and the Left Democrats can at least talk the talk of economic liberalization and balanced budgets. Whether they can walk the walk remains to be seen. Their relatively good performance in this regard between 1996 and 1998 was compelled by the need to enter the euro; the three years before Berlusconi's 2001 victory were characterized by futile squabbling and a pre-election spending spree. But if they do try to address Italy's structural economic problems with supply-side reforms, Rifondazione and the other far-left parties in the coalition will vigorously resist the introduction of what Bertinotti loftily dismisses as "cannibal capitalism" and may press for the introduction of such investor-friendly measures as a wealth tax.

Italy today urgently needs a decisive government that makes restoring national competitiveness its primary task. Unfortunately, it is precisely this sort of government that its political class cannot provide, though many leading politicians on both the Left and the Right know that painful restructuring cannot be delayed much longer. The electoral law, which was amended in 2005 to restore near-perfect proportionality of representation, has made it impossible for a political force commanding only a plurality of the national vote to form a strong government. Italy will not have a Thatcher or anybody remotely like her. Italy's current parliamentary institutions--which like the U.S. Congress boast a complex and powerful committee system and two chambers armed with equal legislative powers--also make introducing systemic reforms difficult.¹

A possible alternative has been broached by "Super Mario", the first-rate former EU commissioner for competition, Mario Monti. He has proposed both the creation of a government of national unity backed by moderates from both the Center Right and the Center Left, and an immediate program of economic reforms, to be introduced by a bipartisan majority as soon as possible after the election.

The latter of these suggestions will probably sink in the mire of the electoral campaign, which Berlusconi launched at the end of January with a media blitz of disconcerting proportions. The former is not impossible if Prodi wins by a small margin but proves unable to govern, or if there is a hung parliament, though constituting such a government would require an act of considerable political courage on the part of President Ciampi or his successor.² In 1995, after the collapse of Berlusconi's short-lived first government, then-President Oscar Luigi Scalfaro charged Lamberto Dini, a former governor of the Bank of Italy, with the task of leading a government of technocrats recruited from outside Parliament. Dini governed for 15 months with the parliamentary support of the Center Left and the Northern League and managed to deliver a substantive pension law that has had huge long-term benefits. It may seem undemocratic to say so, but a reprise of this form of government, under Monti or some other authoritative figure, may be the best Italy can currently hope for.

1 One of the most controversial laws passed in 2005 by Berlusconi was a constitutional reform that would devolve considerable powers to the regions, strengthen the office of the prime minister and turn the Senate into a "Chamber of the Regions." The reform, which was the Northern League's price for staying in the government, must now be submitted to a national referendum and will in any case not come into force until the next decade.

2 The president of Italy has the constitutional authority to nominate the premier. President Ciampi's seven-year term expires this summer. Ciampi, who is in his mid-eighties but in good health, may yet be renewed in office.

Mark Gilbert teaches contemporary history at Trento University in Trento, Italy. He is the author, among other books, of The Italian Revolution: The End of Politics, Italian Style? (1995).