Part of Foreign Affairs Report: The Future of the Eurozone

The End of Berlusconi and the Future of Italy

Why the Solution to Rome's Woes is Simple but Terrible

Italian Prime Minister Silvio Berlusconi is on the way out, the story goes. Come Monday, his center-right coalition, which has dominated Italian politics for nearly 20 years, will be a thing of the past, and Italy will be spared the wrath of the European debt crisis. The opposition thinks it is time to uncork the prosecco. 

But it is not. Italy is far from fixed.

Berlusconi first walked the magnificent halls of the Palazzo Chigi -- the palatial prime minister's residence -- in 1994, when he was a media tycoon, football entrepreneur, a bon vivant, a billionaire, and all of a sudden founder of a political party, Forza Italia. Sophisticated analysts spurned the new party, but for two decades Forza Italia locked in the support of at least a third of the Italian electorate. It won three national elections. And over the years, Berlusconi lined up tens of thousands of political operatives to run the country's major regions and cities, from Lombardy to Sicily and from Milan to Rome.

Voters were captivated by Berlusconi's anti-establishment war cry: "I am a self-made man, not a politician!" They loved his unbridled optimism, his populist style. However, although the prime minister railed against the status quo in his speeches, he failed to reform Italy's stilted economy. He never touched the fat cats -- the tax dodgers, the clubby entrepreneurs who spurned innovation, the class of lobbyists always tied up in shady deals -- or the way they divided public money and assets with little regard for merit and productivity, but instead according to their old web of family and friends. He frequently clashed with the country's powerful unions but never managed to energize the country's sluggish labor market.

Berlusconi's lifestyle was frivolous and excessive. The leftist papers regularly trashed him and his sex parties. (Indeed, it was how the world came to learn the meaning of "bunga bunga.") There were the groupies, the prostitutes, the shiny dancing poles in his villas. The scandals never impressed his supporters, but they did not hurt him, either. At last count, Berlusconi and his staunch ally, Umberto Bossis Northern League, enjoyed 35 percent support in the polls -- not bad after a 20-year run. Even the Catholic Church, while deprecating Berlusconi for his sins, never cut ties with his coalition; dignified Catholic leaders kept serving in the center-right cabinet up to the very end.

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