Whether you call it “dangling lucrative incentives,” or outright vote-buying, it seems likely that Silvio Berlusconi was able to heavily influence the successful outcome of Tuesday’s censure poll that allowed him to avoid calling new elections and imperil his administration. But one could argue that he truly owes whatever remains of his career to his finance minister, Giulio Tremonti, and his central banker, Mario Draghi. With everyone distracted by Berlusconi’s antics over the past decade, it’s been easy to overlook the deft fiscal and monetary maneuvering these two men presided over that gas allowed Italy to weather the global financial crisis.
On the fiscal side, Tremonti, who came to power with Berlusconi in 2001, accelerated long-planned reforms of the country’s pensions system that raised the retirement age from 57 to 60 all the way back in 2004. He has also taken ambitious measures to lower taxes and reduce the budget.
Monetarily, Draghi, appointed by Berlusconi in 2006, has positioned Italy to end the decade with very low net external debt, and improved Italians’ savings rates. Most importantly, Italian banks had nowhere near the exposure to the financial instruments that scuttled swaths of the Greek and Irish banking sectors. As a result, none of them required bailouts.
The Italian economy is far from perfect. Growth, already modest before the crisis, remains very sluggish, and Draghi, a former Goldman Sachs executive, has often found himself at odds with Tremonti, who began his career as a Socialist, over what policies should be taken to boost productivity. Twent-eight percent of Italians aged 15 to 24 remain unemployed. And while nearly all of it is domestic, Italy’s debt to GDP ratio in Europe is second only to Greece’s. These issues have earned Italy the occasional, unfortunate distinction of becoming an additional “I” when economists discuss problems among Europe’s “PIIGS.”
But it could be a lot worse. Had Italy faced any more exposure to the crisis, Berlusconi’s coalition, like the ruling Irish and Greek ones before it, would almost certainly have been swept away. The next time he holds one of his infamous parties (and it’ll probably be soon), he may want to do so on behalf of Draghi and Tremonti.
