Return of the Silviosaur

With one tactless remark last week, an Italian cabinet minister may have inadvertently triggered the fall of the country's technocratic government and the return to center stage of former Prime Minister Silvio Berlusconi.

Corrado Passera, the normally suave and experienced economic development minister told a television interviewer that "a return to the past would not be good for Italy." The remark was an explicit reference to Berlusconi's Popolo della Libertà-led government, which stepped down in November of last year. The immediate reaction was a salvo of criticism from leaders of the PdL and the party's decision to withdraw its support from Prime Minister Mario Monti's government. Berlusconi then strongly hinted that he was planning to throw his hat back in the ring: "I cannot let my country fall into a recessive spiral without end. It's not possible to go on like this," he said in a statement, noting that he had been "besieged by requests" to run.[[SHARE]]

On Saturday, Monti announced that his government would resign, saying the PdL's withdrawal of support clearly represented "a no-confidence vote for the government and its policies." Later that day, Berlusconi confirmed what was already obvious to everyone. "I am running to win," he told reporters. Elections must now be held within 60 days of the dissolution of parliament, and the world will wait to see if  Berlusconi can return to the prime minister's office for a fourth time. If he does, the consequences for Italy and for the rest of Europe are likely to be dire. Even if he does not win, the negative effects will color the whole campaign.

Berlusconi had been hinting at this for a while. A couple of weeks ago, he promised  that he would "pull a dinosaur out of the hat"; the implication was that he was the dinosaur. The given explanation is predictable: Monti's economic policies, according to Berlusconi, are not working, and he has to return in order to save Italy... again. But, given that this is Berlusconi we're talking about, the real reasons are more complicated.

The first is Sunset Boulevard on the Tiber. Berlusconi is the aging star who refuses to accept that he is past his prime and still craves the adulation and attention of fawning fans and the media. He is 76 and despite (or sometimes because of) the very visible pancake makeup, he looks his age and more. His comeback bid is a dangerous ploy, as he also knows that he risks an electoral disaster and bitter criticism from his own former party faithful. The potential for humiliation is likely the reason he has waited so long to jump back in. But that risk evidently wasn't enough.

Berlusconi may also want to return to politics in order to protect himself and his friends. Last week, the cabinet debated a decree that would prevent anyone convicted of crimes carrying a two-year sentence or more from running for office. As the law would only apply to those convicted at all three levels of Italy's court system, only a couple of parliamentarians would be affected -- though quite a few more at lower levels of government.

Even though Berlusconi has faced dozens of criminal indictments over the years and was convicted of tax fraud by a Milan court in October, he has never been convicted at the highest level. But there is talk that before the law is passed, it might be modified to include first- or second-level convictions, in which case Berlusconi would be in trouble personally. The current draft law says that anyone convicted while in office will have to stand down. Berlusconi is expecting judgment in February on the so-called Ruby case, in which he is accused of soliciting an underage prostitute and abusing his power. That would only be a lowest-level conviction, but he likely feels the noose tightening. Some of his close associates, including longtime friend Senator Marcello Dell'Utri, who was convicted at all three levels for false accounting and given a sentence of two years and three months, are feeling the heat as well.[[PAGEBREAK]]

Berlusconi and PdL party secretary Angelino Alfano have also made it clear that another reason for their decision to abandon Monti's government is the lack of progress on justice reform, though they have a fairly unique understanding of that concept. When Berlusconi was prime minister and Alfano was justice minister, they did nothing to answer the most pressing issue facing Italian justice: the years it takes to reach a definitive sentence. This is not only a problem of equity and justice but a serious discouragement to investment; no one is going to invest in Italy if they can't expect the courts to decide civil cases.

Berlusconi's main concern, by contrast, is that judges and magistrates should bear personal civil liability for their actions. In his ideal world, if a prosecution fails, the prosecutor should be personally liable for damages to the accused. It is a measure that smells of vendetta, as well as a way to discourage any prosecutor, not just the over-zealous. His other hobbyhorse is limiting police use of telephone taps. It is no coincidence that wire taps, both those used in court proceedings and those leaked to the media, like the conversations of the girls who went to his parties, have been very damaging to his reputation.

According to current polls, a return to power would still be a long shot for Berlusconi. The center-right is on a downward slope at the moment; they lost regional elections in Sicily in October, and the PdL is currently polling anywhere between 12 and 20 percent nationwide, a disaster compared to the 37 percent they garnered in 2008. Monti had been polling at around 47 percent prior to his announcement. But it's definitely to Berlusconi's advantage to have the election sooner -- when public anger against Monti's pro-European, pro-austerity policies is high -- rather than later, when party infighting will only drag the PdL further down.

There's also a new player on the scene whose emergence may be to the former prime minister's advantage. The Five Star Movement, a recently created party led by the popular comedian Beppe Grillo -- a kind of Genoese Stephen Colbert -- has emerged as the second most popular party in the country, according to pollsters. The party's ideology is mostly left-wing but is defined more by anger against Italy's traditional parties and politics. Berlusconi, though often a target of Grillo's barbs himself, hopes to tap into this discontent and regain some of the alienated center-right voters who have embraced the new party's populist, euroskeptic message. About half of Italy's electorate is either undecided or planning not to vote. They do not like Monti's austerity measures or the old parties. If Berlusconi can mobilize even a small proportion of them, he will increase his share enormously.

The consequences of Berlusconi's threatened return have already been felt. The spread between German and Italian government bonds, which had dipped below 300 for the first time since early last year, immediately jumped to well over 300 after his announcement last week, a tangible demonstration that Berlusconi's claim to be "saving the Italian economy" was nonsense. European stocks plunged on Monday following news of Monti's departure and the potential of Berlusconi's return. It now falls to the old triumvirate of President Giorgio Napolitano, the European Union, and the markets to persuade Berlusconi to step back. If they fail, Italy may once again find itself at the mercy of the Silviosaur.

Couples Retreat

There are many reasons why marriages fail, but often the culprit is disagreement over money. Apparently, countries joined in long-term political unions behave no differently than spouses. Such is certainly the case for France and Germany, whose partnership forms the backbone of that ever-expanding, increasingly motley family known as the European Union. But the family has now fallen on hard times -- cousins have loans coming due they are hard-pressed to make good on, Spain, Ireland, Italy, and Portugal among them. If a widening sovereign debt crisis, a common currency in free fall, and austerity plans weren't enough bad news for Europe, it appears that the already rocky relations between French President Nicolas Sarkozy and German Chancellor Angela Merkel have reached a new low.


Last month, an unidentified source told El País that Sarkozy banged his fist on the table and threatened to leave the euro if Merkel didn't agree to a Greek bailout. She did. This past Monday, the chancellor suddenly canceled a tête-à-tête dinner with the French president. Tit for tat? But Berlin claims it was Paris that stood them up. The EU Summit that begins today in Brussels comes just in time, then. For it's not only Sarkozy and Merkel's partnership that needs couples therapy, but the larger relationship between European governments and their peoples, who are increasingly dismayed at the breakup of a social compact that has produced unparalleled peace and prosperity over the past half-decade.

The French-German pair makes for Europe's oddest political couple. Sarkozy's hyperactive yet casual cockiness is a foil to Merkel's dogged solidity. Where he is effusive, she is reserved. Apparently, she can no more stand his Gallic cheek-kissing ways than her government can stomach Paris's hands-on proposals for addressing Europe's financial crisis. As far back as 2007, rumors were flying so thick about Merkel's distaste for Sarkozy's cuddliness that a German government spokesman felt obliged to tell the Daily Telegraph that, au contraire: "The chancellor rejoiced in the president's warm greetings." Things have only gone downhill since.

Does the evident friction between Sarkozy and Merkel suggest that the French-German motor that has powered Europe for the past 60 years -- and has often required minor tuneups along the way -- might finally be falling apart? On the eve of the EU summit, all the two leaders could agree on was a prohibition against the naked short-selling of some shares and bonds. They'll have to do better than that. The meeting promises a growth strategy for Europe leading up to 2020 and is intended to produce the basis for reforms Europe would like to see in the international financial order in advance of the G-20 meeting in Toronto at the end of June. But it is precisely around the question of exactly how to ensure that the European Union never again faces a sovereign debt crisis such as the one Greece precipitated earlier this year that France and Germany have trouble agreeing.


Sarkozy attempted to seize the opportunity created by the crisis to establish a eurozone secretariat, an economic if not a political government that would take the management of the EU's economic policy out of the hands of central bankers and finance ministers who are widely seen to have bungled their jobs. Not surprisingly, EU finance ministers -- backed by Germany -- categorically rejected this attempted coup. With Jean-Claude Trichet at the head of the European Central Bank and Dominique Strauss-Kahn at the helm of the International Monetary Fund, Merkel might have felt she was already encircled by Frenchmen bullying her on economic policy. The chancellor stood firm. Sarkozy backed down, telling reporters in a joint news conference days before the summit, "We would be better off making the European systems a bit lighter by not creating institutions, to focus instead on being more pragmatic." Merkel couldn't have put it better herself.

These are not the sorts of disagreements that France and Germany, the backbone of the European project, have traditionally aired in public. But could this be a sign of maturity rather than failure? Europe expert Christian Lequesne, director of the Center for International Relations Studies and Research at Sciences Po in Paris, notes that for these leaders born after World War II, "Europe is something that has been achieved. The French-German relationship is now 'interest-driven' not 'values-driven.' Lequesne explains that though Sarkozy must take into account Germany's economic power, the country simply doesn't fascinate him in the same way Britain does. Merkel, with her East German origins, also feels no particular affinity with France. "She often sees France in terms of well worn clichés, an arrogant country, lacking in discipline," Lequesne continued. Still, she too must accommodate France, particularly for the political weight it carries in Europe.        

Like it or not, the two countries are stuck with each other. In a show of solidarity over the weekend, France stunned many observers by joining Germany in announcing austerity measures. After denying austerity was in the works for months, Prime Minister François Fillon pledged to cut 45 billion euros from the nation's budget and raise the retirement age to 62 years. He told a meeting of new members of his political party, UMP, "We've made a commitment to bring down our deficit from 8 to 3 percent by 2013, and we will concentrate all of our efforts on it." France, like Germany, now has the credibility to ask the European Union's profligate members -- including Greece -- to drink the same bitter medicine and cut their bloated deficits down to size.

Predictably, French citizens are already hitting the streets: The militant union Force Ouvrière organized a protest of between 23,000 (according to police estimates) and 70,000 (according to the organizers) in Paris on June 15. But the backlash to austerity promises to be pan-European: Following violent protests in Greece last month, 75 percent of Spain's civil servants staged a strike on June 8, and 20,000 protesters took to the streets of Berlin on June 12. Unions across Europe are uniting to plan a huge demonstration in Brussels on Sept. 29 with the theme of "Yes to more growth. No to austerity measures."

As Reuters reported on June 10 during the meeting of the International Labor Organization (ILO) in Geneva, the view of European unions is that "ordinary families are being asked to pay for the crisis three times -- first as taxpayers to bail out the banks, second as workers with lost jobs and cut wages in the recession, and now as citizens with cuts in pensions and social services." It doesn't help Sarkozy that the announcement of austerity measures comes bang in the middle of the trial of Jérôme Kerviel, the dashing young trader at Société Générale whose hugely leveraged bets lost his bank more than 5 billion euros in 2008 and who epitomizes the culture of financial profiteering many French blame for their current woes.

It promises to be a long, hot summer for Sarkozy, whose popularity ratings ahead of the austerity announcement had already dipped below 30 percent. Still, Sarkozy is in a better position to take political risks than Merkel. Last month, the chancellor suffered the wrath of German voters -- who resent being asked to tighten their belts to bail out easy-living countries such as Greece -- and lost her majority in the upper house of parliament. Like Sarkozy, her poll numbers have sunk to new lows: In Germany, calls are mounting for Merkel to dissolve the Bundestag and hold early national elections. While Sarkozy  may not survive the next French election (were the vote to be held today, polls show that Dominique Strauss-Kahn would win), Merkel may not even survive the next few weeks.


If Merkel pays the ultimate price for failing to reconcile German domestic sentiments with European crisis containment and loses her chancellorship, her departure will see the end of a pairing that both fascinated and frustrated. Merkel's fall would take down with it her pro-business coalition government of Christian Democrats and Free Democrats. As yet, however, given Germany's divided political scene there is no clear alternative -- despite assurances to the Stuttgarter Zeitung newspaper from Sigmar Gabriel, head of that the Social Democrats, that the party could "immediately take over the government."

No doubt, Sarkozy would spend little time mourning Merkel's departure. No matter the dance partners, the pas de deux between France and Germany will continue. The future of the European Union and its single currency depend on it. But more alarming than the friction between Paris and Berlin is the growing divide between European leaders and their citizens. Unless the European Union comes out of the summit this week and goes into the G-20 meeting at the end of June with a strong and united front in favor of imposing pain on banks and other financial institutions equal to what they're demanding from their citizens, it won't just be Sarkozy and Merkel's relationship that will be on the rocks -- but the larger social compact that forged the European welfare state in the postwar era. All the more so if overly aggressive austerity measures stall recovery and plunge Europe into a long recession, as economists Joseph Stiglitz and Paul Krugman have warned. This is the real and very tangible threat to the European Union, and for the sake of the family, Merkel and Sarkozy had better put aside their personal differences and start getting down to business.

Will the recession make Europe's militaries weaker?

Governments across Europe are about to slash their defense budgets -- but they need to ensure they cut correctly.

By Tomas Valasek

The economic crisis has wracked government budgets across Europe, as revenues have fallen and spending on stimulus and bailouts has soared. Already, there are signs that defense spending across the continent will suffer. Finance ministers will be looking for ways to reduce deficit and debt, and military budgets are a tempting target.

Such budget cuts will have some salutary effects: Defense establishments, with their resistance to civilian oversight and emphasis on continuity, tend to get bloated in times of relative plenty. It often takes a crisis to force meaningful reforms. But cuts also threaten to sap the effectiveness of European fighting forces and leave parts of the world exposed to insecurity.

The easiest portion of the budget to cut is operations. But it's also the most important portion. Withdrawing soldiers from faraway places plays well at home and requires no layoffs, but it means fewer troops in some of the world's most imperiled regions. Poland announced in April that it would withdraw from all U.N. peacekeeping operations. While the Poles may be no less safe, fragile countries such as Chad and Lebanon still need foreign troops to keep the peace.

Rather than withdrawing from conflict zones, European countries and agencies should stop sending overlapping missions to the same trouble spots. Both the EU and NATO sent missions to Sudan in 2007, and three different forces are currently fighting piracy off the coast of Somalia. Better to roll those operations into one; the current duplication wastes taxpayer money.

As defense ministries slash their budgets, their instinct will be to cut multinational weapons programs and make any purchases domestically so as to protect jobs at home. But that carries risks. Many truly necessary systems, such as transport airplanes, are so expensive and complex that they are best funded and shared between countries.

Granted, many past collaborative programs have been disastrous, such as the seven-nation plan to develop the A400M military transport aircraft. A modern-day Spruce Goose, the plane cannot fly because its engines, made by a four-nation European consortium, lack the proper certification; the plane is also said to be too heavy.

But the trouble with the A400M lies not in the collaborative nature of the program. The plane is a failure because its designers have been more concerned with securing production jobs than with obtaining a good product. In return for investing in the aircraft, they have demanded that a commensurate number of production jobs go to their country. As a result, bits of the plane are being built all over Europe -- and not necessarily in the countries most qualified to do the job.

European governments must be smarter. They should accept that it makes more sense to order the needed parts from the plant with the most relevant technical expertise. The governments also need to be more ready to buy off-the-shelf components, rather than try to generate jobs by manufacturing parts from scratch.

The impact of the budget cuts -- particularly the reductions in personnel and equipment -- also threaten to turn some European militaries into showcase forces, incapable of deploying abroad and thus irrelevant to most EU and NATO operations. It makes little sense, for example, for all but very few allies to keep tanks unless they are upgraded to be able to operate in faraway places such as Afghanistan and unless the governments have access to aircraft big enough to transport the tanks. As an excellent new study commissioned by the Nordic governments concluded, "small and medium-sized countries lose their ability to maintain a credible defence" when certain units shrink too much.

There are two ways to avoid such outcomes while cutting budgets. Some of the key equipment that makes modern warfare possible -- such as planes providing air-to-ground surveillance or military transport -- needs to be jointly owned. NATO operates a common fleet of aircraft that coordinates air traffic, and the alliance plans to buy transport airplanes for its members to use. This arrangement allows militaries of smaller and poorer European states, like the new allies in Eastern Europe, to take part in complex operations in distant places.

But that alone will not generate enough savings. Indeed, the time has come for European governments to consider abandoning parts of their national forces and infrastructure and to form joint units with their neighbors. Modern militaries do virtually all their fighting abroad and in coalition with others. If they lack the money to equip and deploy their soldiers overseas, they need to consider radical cost-saving measures. More governments should do as Belgium, the Netherlands, and Luxembourg did -- they merged parts of their air forces -- or emulate the Nordic countries, which are considering joining their amphibious units.

Most European governments have, in the past, found it too difficult to part with the cherished symbol of national sovereignty that is a proper army or an air force. But the practical value of such military services in Europe is often negligible. As the recession deepens, defense ministers across Europe should see the crisis as an opportunity to combine certain units and programs across countries. This will save money, which could be put to use properly training and equipping forces for EU and NATO operations.

Tomas Valasek is director of foreign policy and defense at the Centre for European Reform in London. A version of this article first appeared as a post on the Centre for European Reform blog.

Photo: Flickr user Jerome K

Northern Ireland goes back in time

It's looking dangerously similar to the 1980s in Northern Ireland, but a lot has changed since the worst days of "the troubles."

By Simon Roughneen

Last weekend shattered the illusion that the gun had been permanently removed from Irish politics. Two Irish Republican Army (IRA) splinter groups carried out what seemed to be well-planned hits, first against two Afghanistan-bound British soldiers, and later, against a Catholic policeman responding to what turned out to be a terrorist trap. Tragedy that it was, the violence was just the first of two related messes now threatening peace and prosperity in Ireland. The financial crisis has also sent a wave of panic across the now-dead "Celtic Tiger" -- whose economy is now set to shrink by at least 6 percent in 2009 after a decade and a half of record growth.

Is history repeating itself? To many in Ireland, it's like a return to the 1980s -- shootings in the north and a basket-case economy in the Republic. No one, barring the hard-line pro-independence minority, is nostalgic for the bad old days. But some fear they might get a return to the 80s nevertheless.

From the politics, at least, the crisis looks familiar enough to warrant concern. The two splinter groups, which call themselves the Real IRA and the Continuity IRA, continue to push for Irish unification by gunfire; they have resisted the political approach adopted by mainstream IRA leaders. Although this is the first fatal attack since 1998, there have been ample warnings recently that IRA splinter groups were sizing up potential targets. Northern Ireland has seen more than 20 gun and bomb attacks in the past 18 months, wounding seven police officers. One month ago, police found a 300-pound car bomb outside a British army barracks, a hint that some of the old IRA bomb-making and training networks might have been revived and coopted by the dissident groups.

To be sure, these latest murders were intended to spark either a heavy-handed British response, or a reaction from terrorist counterparts on the other side of the sectarian divide. Indeed, the perpetrators might have sought both in a bid to reinvigorate the tit-for-tat vortex of violence that took so long to seal off. The governments in London and in Dublin were quick to condemn the attacks. Yet London will not want to redeploy additional soldiers to Northern Ireland, for fear that this will play into terrorist hands.

It was significant that Martin McGuinness, Northern Ireland's deputy prime minister, pointedly and evocatively described the killers as "traitors." As an IRA leader during the 30 plus years of attritional terror endured by Northern Ireland, McGuinness (who helped dole out a good proportion of the misery) today views the "dissident" IRA groups as a challenge to his authority and that of Gerry Adams, president of Sinn Féin, the political party linked to the "mainstream" IRA. Today, the pair lead Irish Republicanism through political channels -- resisting the tradition of using political violence to agitate for an all-Ireland independent republic. McGuinness called the perpetrators traitors to preempt what hard-liners consider his and Adams's own treachery -- taking formal political office as part of a British-ruled Northern Ireland under the 1998 Good Friday peace deal.

So, what now? During the troubles, as the 1969-1998 conflict is now referred to, Dublin was ambivalent about hunting down the IRA in the Republic, given the heavy-handed British response in Northern Ireland and the threat of Protestant terror groups mounting attacks in the Republic.

Now, however, cooperation between the police forces in both jurisdictions is good. The Republic has a highly professional counterterror police unit and an elite Army Ranger corps modeled on the British SAS (the latter of which is now contributing to an EU-UN joint peacekeeping mission in Chad). Both can be deployed against IRA factions hiding out in the Republic.

One can only hope that the dissident IRA factions have not got too much of a head start on the security forces with the recent attacks. As the Irish economy capsizes, the Dublin government -- and the Irish population -- certainly have plenty of other things to worry about. Unemployment, for example, is expected to reach at least 10 percent before the year is out, leaving vast legions of jobless, much as in the 1980s. This time, there is no where to flee to, as the U.S. and European economies falter too.

The recent violence is troubling, but it's not yet the troubles of the 1980s all over again. As Peter de Vries once said, "Nostalgia just isn't what it used to be."

Simon Roughneen is an Irish journalist currently covering southeast Asia.