Berlusconi Reborn

The collapse of Romano Prodi's center-left coalition, after the senate voted down a motion of confidence in his government, could herald the return of one of Italy's most scandal-ridden prime ministers, Silvio Berlusconi - an awful prospect. But Mr Prodi is not an innocent victim of Italy's notoriously fractious political system. True, his 20-month coalition ranks as one of the longer-surviving of the 61 administrations Italy has had since the second world war. That he has held out for so long, managing at the same time to halve the budget deficit, reduce tax evasion and cut dole queues, must please Brussels. But people hate paying more taxes.

The center-left ran ahead of itself, on both electoral reform and the budget deficit. For over a decade Italy has been searching for a two-party system. The Democratic party was Mr Prodi's answer to the multi-party system. He created it from the merger of eight others in October last year, and it was the leading partner in the coalition with Christian centrist parties that has just collapsed. Its leader, Walter Veltroni, was interested in talks with the opposition leader, Mr Berlusconi, to reform the electoral system in favor of larger parties.

One of Mr Berlusconi's last acts as prime minister was to reform the system in favor of smaller parties, a move which suited his interests at the time. But today there is cross-party consensus that the current law is a recipe for exactly the sort of government crisis that we are seeing today. But in engaging in talks with the Democratic party, Mr Berlusconi cleverly put the wind up the smaller parties in the government coalition, which stand to lose everything if the law is reformed.

In doing the right thing in theory, the center-left walked into a bear trap in practice. The same is true with the economy. Mr Prodi inherited a frightening budget deficit, over 4% of GDP, and responded with an austerity budget which pushed up the tax burden from 40% to 43.3% of GDP. It began to emerge that the situation was not that bad. A tax amnesty introduced by the previous government increased the tax base, by registering more taxpayers. The result was that the money started to gush into the government's coffers, halving the deficit to 2% in 20 months. Great for the public finances, but terrible for Mr Prodi's domestic image.

Mr Berlusconi is pushing President Giorgio Napolitano to call an early election because his party is up in the polls. The outmanoeuvred left is trying to prevent an early election and reform the electoral law first. They say another election is the last thing Italy needs during an international financial crisis. But Mr Berlusconi, for all the wrong reasons, has the more appealing argument.