The Wall Street Journal-20080122-Italian Coalition Nears Collapse- Prodi Tries to Hold To Enough Allies As Party Quits
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Italian Coalition Nears Collapse; Prodi Tries to Hold To Enough Allies As Party Quits
ROME -- Prime Minister Romano Prodi's ragtag government looked likely to fall last night, ushering in yet another period of political uncertainty just as Italy was finally putting its fiscal house in order.
Mr. Prodi was meeting with what was left of his governing coalition as he tried to see whether he could scrape together a majority.
The eventual collapse of his government -- which, plagued by discord and even scandal, held only a single-vote majority in the Senate -- had seemed an almost foregone conclusion since it came to power 20 months ago.
More than half of the members of Mr. Prodi's nine-party coalition had threatened to sink the government at one time or another. Yesterday, a tiny party led by the outgoing justice minister, himself now the target of a criminal probe, appeared to deliver the fatal blow, announcing that its three senators would no longer support the prime minister.
While it is still possible Mr. Prodi could eke out a majority by courting new votes, it seems more likely he will have to hand in his resignation to President Giorgio Napolitano. A collapse would raise the question of whether this government's most important success -- taming Italy's runaway deficit -- will melt away in the political pandemonium that could ensue.
When Mr. Prodi took over after five years of government under conservative Prime Minister Silvio Berlusconi, Italy's budget deficit was running at 4.4% of gross domestic product, and its debt, at more than 106% of GDP, had begun to creep upward after years of shrinking. The country's finances had begun to weigh on the rest of the euro zone as doubts emerged about Italy's creditworthiness.
Mr. Prodi and his finance minister, Tommaso Padoa-Schioppa, succeeded in bringing the deficit down to 2% of GDP, largely through an unpopular crackdown on rampant tax evasion. However, many economic observers worried that the improvements in Italy's finances could easily evaporate, because little progress had been made in cutting into public spending.
Now the country risks stepping into a political void, just as Europe is trying to cope with a global economic slowdown. The Bank of Italy recently downgraded its own projection for growth to 1% for 2008 from already anemic 1.7% previously.
A government collapse could also reignite other fires that Mr. Prodi had been trying to put out. Yesterday, a special commissioner to combat a garbage crisis that has engulfed Naples unveiled his emergency plan. Naples and the surrounding area have been submerged in urban waste, risking serious public-health problems, as space at all local dumps has filled up.
In addition, the government had been trying to negotiate the sale of its flagship carrier, Alitalia SpA, to Air France-KLM SA, over the objections of belligerent unions. If the sale falls through, Alitalia will likely run out of funds within a few months.
If Mr. Prodi can't find new votes to sustain a majority for his government, one of several scenarios could ensue. Under one, Mr. Napolitano, the president, could call immediately for new elections. That would set up a battle between Mr. Berlusconi, the billionaire who leads the center-right opposition, and Walter Veltroni, the mayor of Rome, who is set to take over the leadership of the center-left. Mr. Berlusconi was demanding immediate elections.
A second scenario would see Mr. Napolitano appoint a so-called institutional government, in which an interim prime minister is named to act as caretaker until new elections can be held. That would allow the country to proceed with a much-needed overhaul of its electoral law before going to the polls.
Historically, institutional governments have been among the most effective in bringing about change because they haven't had to worry about maintaining political support for very long. Financial markets have generally preferred institutional governments to elected ones.
Since it was narrowly elected in 2006, Mr. Prodi's government has had many brushes with collapse. Each vote in the Senate brought suspense, as it was never clear until the last moment if the government could muster the numbers. As it limped forward, it was forced to compromise on almost every issue -- from a plan to keep troops in Afghanistan to rights for same-sex couples.
Clemente Mastella, who resigned as justice minister last week, said he was pulling his backing because he was dissatisfied with the political support he had received after he he was placed under investigation and his wife was placed under house arrest as part of a criminal corruption probe.
Prosecutors allege Mr. Mastella and his wife were manipulating the health service in the Campania region by promoting doctors in exchange for political support. He and his wife have denied the allegations.
Behind the political theater is a battle between different institutions that are trying to cling to power against a tide of change. Politicians are increasingly frustrated with a judiciary they claim is manipulating the political process. Prosecutors have launched numerous corruption charges against politicians and charge that there is scant government oversight in the country.
The timing of Mr. Mastella's resignation also stands to blow up an effort to create more political stability by rewriting the country's electoral law. A new electoral law would have made parties like Mr. Mastella's, which commands less than 2% of the vote, irrelevant, forcing them to coalesce into larger, broader political movements to win representation.
