Et tu, Silvio

An end of an era has hit the Italian Peninsula. The continent-wide movement began with Greece when the American-born Greek prime minister, George Papandreou, paid for the sins of institutional corruption and tax evasions and was forced out of office. The former vice president of the European Central Bank, Lucas Papademos now has the happy pleasure of piloting a nation that does not seem to understand its culpability in the current financial crisis. The next ax fell upon longtime and beleaguered Italian prime minister, Silvio Berlusconi. Unlike Mr. Papandreou, who was given only two years to fix an unholy mess whose origins date back to the beginning of the modern country, Mr. Berlusconi has been a part of a system that encourages the type of reckless spending and irresponsible fiscal policies that has brought Italy to the brink.

For most of the last decade, il Cavaliere has ruled Italy like his own fiefdom and has weathered enough political scandals to knock nearly any other world leader from power. In 1998, he was sentenced to two years in prison for bribing tax inspectors; he was acquitted (several times) of falsifying accounts; he named a topless model to a ministerial position in 2008; the next year, he was charged with cavorting with minors and a prostitute; in 2010, his “bunga bunga” parties that amounted to orgies came to light; earlier this year, he combined his 2009 troubles and was put on trial for supposedly paying for an underage prostitute. The most amazing thing about all of these allegations and crimes? They were not what drove him from power. It was the world markets.

For Mr. Berlusconi, it is not surprising how the last ten years unfolded for the man who began his career singing on cruise ships and specializing in television programming reminiscent of Telemundo, complete with dancing, half-naked girls. It is a question of dazzle to obscure the mess. The “dazzle” is numbers that seem, on the surface, to be adequate, including a paltry (by European standards) 8% unemployment rate. However, the devil is in the details, which include structural issues that have been worsening for decades and a government that is failing in providing basic services and creating a competitive atmosphere for businesses. Italy’s GDP in 2010 outgrew only Zimbabwe and Haiti. The country’s public debt is 120% of its GDP – as a comparison, the U.S. public debt is 62% of GDP.

This stands as fuel to a fire that Italy is experiencing with the rest of Europe – a growing jobless rate, particularly in the hard hit Mezzogiorno region. And conditions in the southern part of Italy are not even a new development, with the region in general and Naples in particular always the subject of castigation and dismay. The young people of Italy are fed up with a government that cannot get a handle on its own affairs or those of organized crime and are fleeing to greener pastures in the EU or elsewhere. As the young professionals leave, it exacerbates the already graying population that produces less and takes more. The government refuses to provide an atmosphere where businesses can thrive and unions will not allow for longer work weeks to increase production so as to offset higher wages.

Italy, in short, is a mess and like Greece, it is an institutional, historical mess. Mr. Berlusconi is one of the richest men in Italy and no doubt, will ensure that his fortunes and security remain intact. But the country he “led” over the last decade will suffer the consequence. The new prime minister, Mario Monti, can expect a great deal of support from a populace tired of his megalomaniacal predecessor. But with yields on Italian bond rates climbing to nearly 7%, it will not be easy to put together a government that can keep the Italian economy from going into the ditch. Mr. Monti will need to move quickly and ensure parliamentary support if he hopes to make long-lasting and beneficial changes. The continent and the world await news.