Prodi faces big challenges, Berlusconi among them

WORLDVIEW: Roberto Calderoni, Silvio Berlusconi's minister for reform, described Italy's electoral law as a porcata, a term loosely translated as a "piece of crap".

In a piece of xenophobic buffoonery, he had to resign after unbuttoning his shirt during a television interview to reveal the Danish anti-Islamic cartoons printed on his T-shirt.

Berlusconi has described those who vote for the centre-left bloc as coglioni - bollock brains.

Vulgar, demotic and populist are but some of the adjectives thrown at them by liberal and left-wing cognoscenti. The criticisms are shrugged off - for do not these words all derive from those for the "people"?

Berlusconi lost the elections for the chamber of deputies by a mere 25,000 votes out of more than 38 million. Considering his success in closing the gap between the centre-right bloc and the centre-left led by Romano Prodi - from a 10-point lag in the polls one year ago and a consistent four- or five-point one in the last few months - he very nearly pulled off a remarkable victory. The swing was consistently towards him, helped, he calculated correctly, by a high turnout of 83.5 per cent.

The new election law was forced through parliament last October, reversing the first-past-the-post system adopted in a 1993 referendum. Berlusconi did so when studies showed he could do better, and the centre-left bloc worse, with an even more proportional system than was used before. It would fragment the left by making it more fractious.

Thus Prodi, should he win, would have to rely more on the opposition. Berlusconi's call for a grand centrist coalition this week should be seen in that light, since he had already queered the pitch.

Prodi showed his steely side in claiming the victory this week, resisting allegations of fraud and rejecting a German-style coalition. He insists he can govern effectively with a decisive majority in the chamber of deputies, where the winner receives a voting boost, and in the regionally elected senate, where Italians abroad and senators for life gave him the victory.

He says the structural economic reforms agreed in a detailed programme can be put through in a disciplined fashion, without undue resistance from the far-left Rifondazione Comunista, who signed up to it. Writing in Le Monde, he pledged to follow three principles in his foreign policy: encouraging a strong and united Europe; developing a more solid and equal transatlantic relationship; and supporting multilateral approaches to global problems.

The contrast with Berlusconi is sharp and clear in conventional terms. This should not be underestimated, since Italians voted overwhelmingly for the blocs, with others gaining only one seat in each house. The foreign policy objectives reverse Berlusconi's Euroscepticism, his membership of Bush's (and Blair's) coalition of the willing, and pointedly seek out an alternative approach to world politics.

Not surprisingly they have been welcomed in Paris, Berlin and Brussels (rather less so in London and with ill-concealed regret in Washington).

Berlusconi's economic performance over his five years in government was dismal. Italy's growth in 2005 was zero, and only 3.5 per cent since 2001 - over which time it has dropped from 24th to 47th in the World Economic Forum's competitiveness rankings. Exports, productivity, gross domestic product and living standards have all fallen. Youth unemployment is 25 per cent. Budget deficits and gross public debt are well outside euroland limits.

All this has strained solidarity, as social and regional inequalities increased. A new federalism of the prosperous has developed in northern Italy, contemptuous of southern backwardness and dependence and increasingly unwilling to subsidise it.

Competition from China and India is hitting the small- and medium-sized businesses whose technological and entrepreneurial flair drove Italy's success in the 1980s and early 1990s, in textiles, footwear and white goods. Its percentage of world trade has declined from 4 per cent in 2001 to 2.9 per cent last year, and the balance of trade is well into the red.

Berlusconi's record has not been much better than that of the centre-left when it governed Italy from 1996 to 2001. Prodi was but one of three prime ministers discarded in those years, his two-year period in office undermined by the Rifondazione group. Typically, the left dismissed Berlusconi's staying power in opposition then, and his appeal in 2001.

Prodi faces three major tasks on the domestic front: to push through structural reforms without provoking a French-style revolt; to create and manage a sustainable political base within his broad coalition; and to broaden his national appeal by generating enthusiasm for his rather bland and uninspiring project.

The two Italys are evenly divided between those who detest communism and those who cannot stand Berlusconi. Specialists in Italian affairs underline what a mistake it is to underestimate Berlusconi's political skill and appeal.

He filled the political gap created when the Christian Democrat bloc collapsed in a welter of corruption scandals, winning power briefly from 1994-6. He became the darling of the huge self-employed class in the smaller towns, attracted by his populist, regular guy image. He uses the classical populist technique of attacking political elites from without while participating fully in their system.