THE FUTURE OF THE BERLUSCONI COALITION: FRACTIOUS

C O N F I D E N T I A L ROME 003679 SIPDIS E.O. 12958: DECL: 08/12/2013 TAGS: PGOV PREL IT ITALIAN POLITICS SUBJECT: THE FUTURE OF THE BERLUSCONI COALITION: FRACTIOUS SOUND AND FURY, BUT STAYING TOGETHER REF: A. ROME 2799 ¶B. ROME 2529 ¶C. ROME 2674 ¶D. ROME 2284 ¶E. ROME 3047 Classified By: CHARGE EMIL SKODON, REASONS 1.5 (B) AND (D). ¶1. (C) SUMMARY: Summer doldrums and August vacation have not interrupted front-page squabbling in the Italian government coalition, once perceived as a tight, cohesive group in stark contrast with the fractured center-left opposition. Public spats can be expected to continue as Italy enters a long spell of campaigning for increasingly important European and local elections after a relatively calm two-year interval. Nonetheless, our money remains on the Government's staying power, in part because the center-left opposition is more badly split than the governing coalition. Berlusconi, we think, wants to claim his place in history as the first post-War Italian Prime Minister to serve a full term, and will do his utmost -- if often entering late into the fray -- to keep his unruly "boys" together. His coalition partners may be increasingly temperamental and demanding, worrying about their own electoral futures, but so far, they indicate -- however grudgingly -- that they will stick it out. Berlusconi pays a price for mollifying them: substantial policy paralysis. The question is whether the large chunk of traditionally centrist voters who took a chance on him will continue to do so when his coalition fails to deliver the meat of its ambitious, oft-touted reforms. END SUMMARY. ¶2. (SBU) We expect to see tensions within the center-right governing coalition exhibited publicly with varying intensity and intervening lulls from now until the next national elections, whether those come in 2006 or are called earlier. In one recent example, the smallest and most centrist coalition partner, Union of Christian Democrats of the Center (UDC),threatened to join the opposition in voting for a no-confidence motion against Justice Minister Roberto Castelli (a member of the third-largest coalition partner, the Northern League). They were upset that Castelli had held up a request for judicial assistance from the U.S. under the Mutual Legal Assistance Treaty (MLAT) on the basis of a recently-passed law granting immunity from prosecution to incumbents of Italy's five highest institutional offices (Presidents of the Republic, Senate, Chamber of Deputies, and Constitutional Court, and the Prime Minister; see Ref A). The MLAT request was initiated by Italian magistrates investigating the "Mediaset" case alleging tax fraud and false accounting in a Berlusconi firm's purchase of TV rights to U.S. films. ¶3. (C) Castelli initially took the view that the new law prevented not just prosecutions per se, but also arguably investigations, despite fairly clear language to the contrary (at least to our reading; see Ref B). UDC cried foul. The PM stepped in and restored order; the MLAT request went forward. The vote of no confidence failed, with all coalition members joining to defeat it. (NOTE: Some media inaccurately reported a "refusal to act" on the MLAT request by Embassy's Justice Attache. In fact, the Ministry of Justice, acting in its capacity as "Central Authority" under the Mutual Legal Assistance Treaty, forwarded the MLAT request to the Embassy DOJ Attache on June 11. As the request was being processed for forwarding, the Ministry rescinded it in order to review the applicability of the new law, only to resubmit it to us several weeks later. Upon its resubmission, the MLAT request was forwarded to the U.S. Attorney's office in Los Angeles for execution. The USG and its actions were an incidental footnote in a domestic political dispute -- even in the furthest left-leaning papers. END NOTE.) ¶4. (SBU) Two other controversies also erupted into recent public sparring within the coalition. On August 1, Parliament passed a long-debated bill reducing sentences for some prisoners. The measure is intended to alleviate overcrowding in Italian prisons (which are approaching 140 percent of designed capacity),and by extension, to respond to a call for clemency from Pope John Paul II. In this case, the Northern League (Lega) and the second coalition partner National Alliance (AN) objected to the original legislation, accusing UDC (which sponsored the clemency bill) of going beyond the Government's agreed, get-tough law and order platform. An intra-coalition compromise reduced both the scope and length of sentence reductions. ¶5. (SBU) The other ongoing controversy involves calls, pushed primarily by Berlusconi's Forza Italia (FI),for investigations into the "politicized judiciary" in the wake of charges of "massive corruption" by a Milan tribunal in its ruling on a corruption case against several Berlusconi associates (Ref D and septel). This is, in part, discussion of long-standing proposals for such an investigation, but even within the coalition, renewed calls coming on the heels of a verdict unfavorable to the PM drew internal rebuke. Ironically, the issues that have made a public splash thus far deal with relatively easy stuff. The more substantive issues yet to come -- devolution and pension reform to name two -- portend deeper, and thus possibly noisier, divisions. ¶6. (C) So, what gives with the vaunted stability of the Berlusconi coalition, with its strong parliamentary majority? Is government collapse in the works? Are we witnessing the segue to Italy's 59th government since the Republic's founding? We think not. This is a coalition, and coalitions are messy. The May administrative elections (Ref C),insignificant as they were overall, disturbed the balance within the coalition and prompted calls for a reconsideration of internal power distribution. Italy will hold EU Parliamentary elections in 2004, another round of local elections with some significant prizes in 2005, and national elections not later than 2006. Europarliamentary elections, the next test, use straight proportional voting; parties show their strength by running strong individual campaigns. (The center-left is discussing breaking with common wisdom and past practice and running a single-ticket coalition in these elections. We doubt they will do so, in the end -- on both left and right, these elections provide an important barometer for individual parties to see where they stand, for better or worse.) This is what we see as perhaps the strongest impetus to coalition sniping: jockeying for individually strong party showings in the next elections. ¶7. (SBU) The long hot summer caused by a record heat wave is another. Not only are tempers frayed (possibly not a significant factor in the political squabbling, although it is being used as justification for any number of homicides and brawls nationwide),but politicians must keep their names before voters. How else to do so, besides getting in the media, which one can rarely do by praising others. Attacks and criticism are called for, even cannibalistic attacks on one's fellow coalitioners. Even if summer eventually ends (a prospect for which weather forecasters are giving us little hope),the need for visibility in the run-up to elections (in whichever year) will provoke continued arguments, as will continuing disparities regarding economic policy, especially between die-hard reformers and cautious political tacticians. ¶8. (SBU) The center-right coalition has held up well, for a melange of four disparate parties. Forza Italia, a business-oriented, conservative party, has focused much rhetoric on the need for economic reforms in order to give all Italians the hopes of mimicking the success of party leader Silvio Berlusconi. More than that, it is a party with one strong leader. Berlusconi is undisputedly the glue that holds the coalition together, but he has also used his Government's strength to protect his personal interests. (Which is not to say that at least some of the legislation that has protected the Prime Minister is not good policy, as well.) National Alliance, with its roots in Italian Fascism, is seeking to remake its image as a mainstream center-right party and mostly concurs with FI policies. AN's leader, Deputy PM Gianfranco Fini, is succeeding in burnishing his institutional image. But Fini also faces a strong populist wing within AN, pushing for more government largesse. ¶9. (C) The coalition's two "poles" are the Northern League and UDC. The Lega is a regionally-focused party whose overwhelming policy goal is to "liberate" the north from the "burden" of supporting the poorer south. Its stringent immigration and crime control policies put it further at odds, in particular with the smallest coalition member, Catholic-oriented UDC. Lega leader Umberto Bossi's fiery and uncompromising rhetoric to followers at rallies in his northern Italy power base is a constant source of friction with especially the two "nationally-oriented" coalition partners, AN and UDC. (Some observers, at least, perceive FI, like the Lega, as largely a creature of the north, despite its strong support in, inter alia, Sicily and Apuglia. They cite Berlusconi's Milan business background and support for his business-oriented policies in Italy's northern commercial centers. Indeed, many intra-coalition disputes end up with strong regional overtones, with UDC and/or AN backing Italy's southern region against the Northern League, and Berlusconi's FI called in as referee.) ¶10. (C) Finally, UDC (successor to Italy's traditional Christian Democratic (DC) party),nostalgic for Italy's decades of bloated government and unbridled budget deficits under DC leadership, is often odd man out in the coalition. It shares fewer of the right-leaning perspectives of its partners, but still relishes having party leader Pier Ferdinando Casini as President of the Chamber of Deputies and an acknowledged part of the Government's power team. (The former Christian Democrats have flirted with uniting as a "centrist block," and some probably still dream of the old glory days. Casini, however, has firmly ruled out any alliance shifting his part of the grouping to the left, which curtails their flexibility.) ¶11. (C) Elections underscore the divisions. When pressed, however, most party representatives across the coalition say they remain better off within the coalition than outside of it. At least to our faces, they insist the coalition will hold, although it will take more of Berlusconi's time keeping the disputes under control and restoring discipline. As tensions rise, the number of calls for the PM to hold member parties' feet to the fire has increased. UDC and AN want him to rein in Bossi. Some in FI want him to remind UDC of its proper place. AN wants more recognition for its stable and responsible role, often putting coalition interests ahead of its own, even at the occasional expense of the party's public image. Even Senate President Pera (FI) recently expressed frustration to the Ambassador with Berlusconi's failure to "correct problems" in the coalition. ¶12. (C) Berlusconi himself has strong motivation to keep all four members firmly in the coalition. If either the Lega or UDC were to leave, the coalition would survive -- but the remaining smaller "extreme" coalition partner would gain disproportionate influence, making the balancing act that much more difficult. In the end, however, being in government gives coalition members and their constituents more than they can get on the outside. In the end, political support for Berlusconi remains relatively strong, despite some erosion. And, there is really no other coalition to which the partners could turn. (Even if parts of UDC could function comfortably in a center-left coalition, the fragments would be too small to serve as king maker.) Therefore, we wager the Government will hold through Italy's EU Presidency term, and indeed, we think it will likely go full course. ¶13. (C) Perhaps more tellingly than what Government coalition members say, opposition leaders share this assessment of the Government's durability. The largest center-left party, Democrats of the Left (DS),has developed a theory that Berlusconi could seek to force early elections, perhaps saying he lacked the full support of his own coalition and therefore must have the renewed mandate of the Italian people. (NOTE: Elections can only be called by President of the Republic Ciampi, who could also urge another try at forming a coalition or appoint a technical caretaker government. END NOTE.) But even as they lay out the scenario, DS members admit it is not a likely one. One thing attracted our attention, however: EU Commission President Romano Prodi might not be able to run if elections were held before the expiration of his curtailed term in November 2004. He would have to resign as Commission President, which he has said he would not do. Prodi is considered by most to be the only potential candidate with real staying power against Berlusconi. He is the only tested politician who might be able to pull together a center-left even more fractured, diverse, and ideologically split than the governing coalition. ¶14. (C) In the end, we are willing to bet a small sum that Berlusconi's lust for the limelight, his thirst to hold a significant and perpetual place in Italian history (and maybe to serve in the future as President of the Republic),will encourage him to do what it takes to keep his coalition in place at least until he is the longest-serving premier (May 4, 2004),but better until he becomes the first PM to serve a full electoral term. He also has a strong personal incentive to serve out his full term (and be re-elected to another): As soon as he is out of office, he faces the resumption of his Milan corruption trial (Ref A) and a probable guilty verdict (either because he actually is guilty or because the judges have already determined their verdict, depending on one's point of view). As the center-right leader with the stature and proven success record to keep the parts together, we think he can succeed, as long as the two smaller partners continue to believe they are better off in, than out of, the coalition. We are not certain if he realizes that his role as broker, arbiter, and undisputed final authority for the coalition will become increasingly time-consuming. It is widely reported that he dislikes the negative public image generated by public intra-coalition squabbling. It is also rumored that he finds the role of tough guy distasteful, and as tensions build more publicly, in at least some occasions a tough guy is needed -- and no one else in the coalition has the stature to impose order. ¶15. (C) There is a price to preserving coalition harmony and making history, however -- policy paralysis. Much of Berlusconi's fence-mending involves massaging coalition members' divergent positions on key policy issues, notably pension reform, immigration and trimming further state spending. In this case, though, "massaging" often means "delaying action." It is a solid formula for maintaining the coalition, but one that may play poorly with some centrist voters who gave Berlusconi and Forza Italia a chance in hopes that their results-oriented "Contract with Italy" offered something other than Italian politics-as-usual. The center-left's inability to offer a coherent alternative reduces the political costs to policy inaction for Berlusconi, however. The emergence of a strong "anti-Berlusconi" around whom the opposition could unite might change that calculation. At this point, however, it is by no means certain that Prodi could play that role if he returned to domestic politics, and there are few other contenders on the opposition's horizons. Skodon NNNN 2003ROME03679 - Classification: CONFIDENTIAL