Bloomberg News

Italy Votes as Monti Austerity Policy Challenged

February 24, 2013

Former Italian PM Silvio Berlusconi

Former Italian Prime Minister Silvio Berlusconi leaves the voting booth before casting his ballot at a polling station in Milan. Photographer: Olivier Morin/AFP via Getty Images

Italians voted for the first time since Europe’s financial crisis ushered in unelected leaders who imposed an austerity regime to stem the turmoil.

Turnout fell today from the 2008 election, with the initial estimates of the result due tomorrow shortly after 3 p.m. in Rome, when the second day of balloting ends.

The populist campaigns of Beppe Grillo, once a television comic, and former three-time Prime Minister Silvio Berlusconi, who is fighting a tax-fraud conviction, have focused on overturning the tax increases enacted by incumbent Mario Monti. Front-runner Pier Luigi Bersani of the Democratic Party and Monti have vowed to maintain budget rigor.

Bersani probably will gain a majority in the 630-seat lower house, the Chamber of Deputies, according to polls published Feb. 8, before a moratorium on surveys started. Victories by Grillo, 64, or Berlusconi, 76, in swing regions such as Lombardy and Sicily may prevent anyone from controlling the Senate, producing gridlock or even new elections.

“If Berlusconi wins, the markets will be quite concerned, but if he doesn’t, if there’s a hung parliament, that’s probably about what’s expected,” Alexander Friedman, global chief investment officer of UBS AG, said Feb. 22 on Bloomberg Television’s “On the Move” with Francine Lacqua. “It still won’t be nearly as scary as it was a year ago.”

Monti’s Backers

Monti, 69, was appointed by President Giorgio Napolitano in November 2011 with Italy’s 10-year borrowing costs near 7.5 percent, doubts whether the world’s third-biggest debtor could stay in the euro and Berlusconi the butt of jokes among his European counterparts. The yield is now 4.45 percent -- its average between the introduction of the euro and the collapse of Lehman Brothers Holdings Inc. -- and has barely budged during the two-month campaign.

With the backing of 80 percent of lawmakers, including Bersani’s party and Berlusconi’s allies, Monti implemented the austerity demanded by markets and European policy makers led by German Chancellor Angela Merkel. He pushed through 20 billion euros ($26 billion) of measures, including a tax on primary residences, and raised the retirement age. Monti says he fell short in deregulating the labor market to encourage hiring.

“There were forces on both sides of the spectrum against this strategy, especially the Left,” Monti said on Feb. 21.

‘Recession Spiral’

Monti remains under attack from Grillo and Berlusconi, their criticism stoked by Italy’s prolonged economic slump. Berlusconi, appearing at a news conference yesterday at the training facility of his AC Milan soccer club, blamed austerity policies for triggering “a recession spiral,” according to the Italian news agency Ansa. The Corriere della Sera and la Repubblica newspapers said Berlusconi’s appearance violated the customary 24-hour “silence” period before the election.

Turnout at 7 p.m. for the Chamber vote was 46.7 percent, down from 49.2 percent at the same time five years ago, according to the Interior Ministry.

Three protesters from the feminist group Femen protested topless at the Milan polling station where Berlusconi was voting. The demonstrators had “Basta Berlusconi” written across their bodies and shouted the same. Police wrestles the screaming women to the ground before carrying them off, television images showed.

Italy is in its fourth recession since 2001. Its gross domestic product will fall 1 percent this year after a 2.2 percent decline in 2012, the European Commission forecast Feb. 22. Unemployment will reach 12 percent in 2014 after rising to 11.6 percent this year, the commission said.

Sagging Competitiveness

Turning campaign promises into policy may be stymied by Italy’s ranking as the 42nd most competitive economy in the world, between Poland and Turkey, according to the World Economic Forum. Among the 17 euro countries, it ranks 11th.

Grillo, who embraces the term populist, told crowds at his two-a-day rallies that Italy must give monthly stipends of 900 euros to the unemployed and cut the work week to 20 hours. Italy’s debt should be renegotiated, and all lawmakers must be swept out, he said. Grillo, who isn’t running himself due to a manslaughter conviction in the 1980s, chose the candidates of his 5 Star Movement in what he called an online primary.

Grillo is “an anti-establishment vote,” said Giuseppe Ragusa, assistant professor of economics at Luiss University in Rome. “People are tired of high taxes, high corruption, of politicians not being able to fix the many problems that Italy has.”

Berlusconi Guarantee

Taxpayers got a guarantee from Berlusconi, who advocates tax cuts, rebates and amnesties. The media magnate said in his closing campaign appearance Feb. 22 he would pay 4 billion euros out of his own pocket to refund the property tax known as IMU.

“I’ll take 4 billion euros of my fortune and I’ll give it to Italians,” Berlusconi said, citing a campaign mailer he sent. “My signature means that with that letter, anyone who paid the IMU can go to the judge and ask me to return the money if as prime minister I haven’t done what I promised to do.”

Bersani, 61, has proposed raising taxes on the wealthy to finance breaks for lower-income families, while citing the need to maintain the rigor applied by Monti to meet European Union targets.

Bersani had 33.8 percent support in an SWG Institute poll published Feb. 8, down 1.1 percentage points from Jan. 9. Berlusconi gained 2.5 percentage points to 27.8 percent over the same period, while Grillo rose 2.9 points to 18.8 percent. Monti, running fourth, slipped 0.4 points to 13.4 percent, according to SWG.

“I love the kids of the 5 Star Movement,” Bersani told state broadcaster RAI’s interviewers Feb. 22. “I don’t have a problem with the people who go into the streets with Grillo. I can understand them. I have a problem with Grillo.”

To contact the reporters on this story: Andrew Frye in Rome at afrye@bloomberg.net; James Hertling in Rome at jhertling@bloomberg.net

To contact the editor responsible for this story: Dick Schumacher at dschumacher@bloomberg.net


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