Enrico Letta tries to end Italy’s 20-year ‘Groundhog Day’

Just days before confronting a threat by Silvio Berlusconi to bring down their coalition government, Enrico Letta, prime minister, joked that he was reminded of the US movie Groundhog Day where the protagonist is stuck in a time loop, living the same day again and again.

Except in Italy’s case, Mr Letta said, this had been going on for 20 years, a reference to the span of Mr Berlusconi’s grip over the centre-right.

Back on television after the 77-year-old billionaire staged a humiliating last-minute reversal in parliament, a more buoyant prime minister declared that the 20-year chapter was “closed”. Using the Italian for two decades – ventennio – often used as shorthand for the period of Benito Mussolini’s fascist rule in the 1920s and 1930s – Mr Letta captured the next morning’s headlines.

For sure Mr Letta, 47, has emerged from the fray with his personal authority enhanced. The risk of a second round of elections this year has been averted. His fractious centre-left Democratic party has rallied around him.

Mr Berlusconi’s failure to grasp the scale of a revolt within his own People of Liberty underlined his failing powers to the point where he no longer holds a gun to Mr Letta’s head. And he still faces the prospect of being expelled from the senate, being banned from public office and serving a one-year sentence, under house arrest or through community service, following his conviction for tax fraud in August.

Doubts persist, however, over Mr Letta’s ability to capitalise on his political victory and steer the eurozone’s third-largest economy out of its longest postwar recession with the serious reforms needed to ensure sustainable growth.

“We live in a system that fosters unemployment and recession, prisoner of lobbies armed to the teeth and torn by a gulf between people and institutions. Zero economic efficiency, zero social equity, zero democratic legitimacy,” thundered Corriere della Sera, Italy’s leading daily, in a front-page commentary on Thursday.

Official forecasts that the recession was bottoming out have been thrown into doubt by latest figures showing industrial production fell 0.3 per cent in August from July, significantly worse than expected. Crushed by public debt approaching 133 per cent of gross domestic product, Italy’s economy is the worst performer among advanced nations, having lost 8 per cent of output in five years.

The image of a government incapable of taking major decisions was enhanced on Wednesday when Fabrizio Saccomanni, finance minister, announced latest adjustments to keep Italy on track to meet the 3 per cent budget deficit ceiling agreed with Brussels. Public spending is to be cut by €1.1bn – about 0.13 per cent of the total – by the year-end, while €500m will be raised by shuffling property assets from one state account to another before being eventually privatised.

Mr Letta’s uncomfortable left-right alliance is also revealing its statist tendencies in dealing with unwanted foreign takeovers of assets deemed to be of strategic national importance.

Legislation in the pipeline would enhance what the media is calling the “golden power” of the government over transport, communications and energy sectors, partly in response to plans by Spain’s Telefónica to control Telecom Italia. The government also wants to prop up Alitalia, the national carrier facing its second bankruptcy in five years, to prevent the loss of jobs feared by an outright takeover by Air France-KLM, its largest shareholder.

The next battle looming is the 2014 budget to be presented to Brussels for approval next week. Mr Letta’s main aim is to cut the excessive cost of labour by reducing public spending but he faces opposition from the left.

Mr Letta needs support from Mr Berlusconi’s People of Liberty but the party has fractured down the middle, with Angelino Alfano, secretary and deputy prime minister, leading “moderates” who refused to bring down the coalition last week.

Mr Berlusconi is still struggling to preserve unity in what amounts to a leadership struggle over the future of Italy’s centre-right, with both factions laying claim to be the party’s true “liberal” heirs. Mr Letta risks being caught in the middle of a bitter divorce rather than Hollywood’s love story outcome.

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