Olive coalition leads Italy across the Red Sea

"I am called on to fill a role that is historically very important - to lead Italy into Europe, to pull together a fragmented…

"I am called on to fill a role that is historically very important - to lead Italy into Europe, to pull together a fragmented country and unite it and then lead it across the Red Sea."

The Moses in question is the Italian Prime Minister, Mr Romano Prodi, the Red Sea the last 18 months of fiscal austerity and the promised land nothing less than a place in the starting line-up for European Monetary Union (EMU). As Mr Prodi looks back over 1997, he can be forgiven for feeling satisfied with progress made so far on the rocky road to ensuring that Italy meets the convergence criteria for the single European currency. And as he looks forward to 1998, he knows only too well that Italy must sustain both fiscal rectitude and political stability (two relatively new factors on the Italian horizon) if he is to achieve his self-imposed European goals.

At a recent informal gathering with members of the resident foreign press in Rome, Mr Prodi told us that politics was a profession he had had to learn as he "went along". If that is the case, then the apprentice politician has learned a lot since leading his centre-left Olive coalition to electoral victory in April, 1996.

By the end of 1997, his government was beginning to look like a continuing success story, especially when compared with some of the corrupt Christian Democrat/Socialist coalitions of the recent political past. As he heads into the New Year, Mr Prodi can take courage from a number of factors.

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Firstly, Italy's notoriously runaway public finances seem well under control. Secondly, his government has survived two potentially fatal inner coups. Thirdly, 1997 was the year that Italy re-emerged on the international stage after a 50-year hibernation to lead a multi-national task force in Albania. Fourthly, local government elections in November gave his Olive coalition an overwhelming vote of confidence. Finally, the opposition centre-right and its leader, Mr Silvio Berlusconi, both now seem in disarray. For once, an Italian government has plenty to crow about.

End of year economic indicators make impressive reading, at least by recent Italian standards. Firstly, inflation in 1997 touched a 30-year low of 1.4 per cent, while the overall annual figure will almost certainly be under 2 per cent - not a bad result, bearing in mind that many economists only a year ago dismissed a 2.5 per cent annual inflation estimate for 1997 as unrealistic.

Then too, European Union, government and independent analysts are all agreed that Italy's Deficit/GDP ratio for 1997 (a key convergence criteria) will be 3 per cent or perhaps slightly under.

On the political front, Mr Prodi survived two serious shakedowns, both of them provoked by his government allies, the hardline Marxist party Rifondazione Communista. Although Rifondazione has no seat in government, the Prodi executive still relies on its 34 votes in the lower house.

Rifondazione twice nearly took the rug from under Mr Prodi's feet in 1997. First, it withdrew its support on the issue of Italy's leadership of the task force to Albania. That dispute came last Easter and was resolved only when the centre-opposition agreed to get the government out of its embarrassing impasse.

Much more serious, inevitably, was the government crisis provoked in October by Rifondazione's objection to the 1998 budget proposals. After 17 months which had seen $58 billion dollars worth of public spending cuts and tax hikes, it seemed illogical that the party should baulk at a final $3 billion dollars worth of such cuts.

To some extent, Rifondazione was playing a dangerous card, linked to ensuring its own survival, which could be threatened by the continuing success of the Prodi regime and, in particular, of the biggest party in the governing coalition, the ex-communist Democratic Left (PDS).

In the end, the Marxists backed off under pressure from an outraged public opinion, which understood only too well that to bring down the Prodi government on such fundamental economic legislation would be to kiss goodbye to Italian inclusion in the start-up of EMU. Not only had Rifondazione's threatened sabotage failed but, given the groundswell of disapproval, it may well be some time before the party and its leader, Mr Fausto Bertinotti, attempt anything similar. In that sense, Mr Prodi's government is now stronger than at any period since taking office.

The pro-Olive groundswell was emphatically underlined just one month later when its candidates romped home in mayoral contests in four of Italy's biggest cities - Palermo, Naples, Rome and Venice. Overall, Olive candidates won 40 out of 80 nationwide mayoral elections, with the centre-right winning 25 and the secessionist Northern League winning 15.

Little wonder that these same elections left the centre-right licking painful wounds. Indeed, one of the great questions to be resolved in 1998 concerns the opposition. Will it admit that Mr Berlusconi's many judicial problems (he currently faces corruption, bribery and illegal party funding charges in four different trials, while early this month he was found guilty of fraudulent accountancy practices)and his highly personalised approach to politics, are simply too much of a liability?

As he looks forward to 1998, Mr Prodi knows only too well that for him also many delicate issues remain unresolved. There is the Northern League, whose calls for the secession of Padania (Northern Italy) continue to attract electoral support. There is the ongoing problem of illegal non-EU immigrants (particularly Albanians), a problem that may only partly be resolved by new legislation soon to be ratified.

There is the huge problem of 12.5 per cent unemployment, not to mention fundamental issues such as reform of the state primary, secondary and third level education system. There is the problem of a very disgruntled farmers' lobby (dairy farmers have taken to the street in protest at fines over milk quotas). There is the question of finding a job for the one-time national hero, former investigating magistrate Mr Antonio Di Pietro, whose November by-election win as an Olive candidate in Tuscany has put him back on the political centre stage.

These and many other problems face Italy and Mr Prodi in 1998, but as far as the Prime Minister himself is concerned, the number one task remains to steer Italy through the "Red Sea" on the road to Europe and EMU.

Nothing will matter more in 1998 and no European head of government has more clearly nailed his colours to the EMU mast. Come next May, we will know if he and Italy have reached the promised land.