The two govt heads scalped last week by the euro crisis could not be more different from each other.
Athens and Rome, the two great anchors of ancient European civilisation, are burning with fiscal fire run amok. And, the flames have consumed their leaders, with George Papandreou and Silvio Berlusconi forced into resigning in quick succession. The most high-profile victims of the euro crisis thus far, the two men couldn’t be more different.
Berlusconi is the almost mythical force that has dominated Italian politics for close to two decades. His burlesque leadership has seen the ageing Prime Minister spend more time defending himself against sexual charges than reforming the country’s shaky economy.
Larger-than-life and seemingly unembarrassable, his personal business empire was valued by Forbes at $9 billion in 2010. Born in 1936, Berlusconi came from a middle-class family in Milan, northern Italy, and began his career as a crooner on cruise ships, where he perfected the showman skills that came to the fore in his later political avatar. In the 1960s, Berlusconi began to build a business empire, as a property developer. He then moved into the media, establishing his own cable television channel. By the time he founded the political party Forza Italia (named after an AC Milan chant, meaning ‘Go Italy’) in 1993, his commercial successes were seemingly endless, his largesse legendary. He was by then Italy’s second largest employer. Since 1993, he has won three elections and been Prime Minister for a total of nine years.
Although he came to power on a ticket that promised deregulation and lower taxes, Berlusconi has in fact spent most of the last two decades attempting to use political clout to protect his personal business interests, changing laws to gain immunity from prosecution. As a result, Italy’s corrupt political and business culture, with its complex patronage networks, entrenched monopolies and vested interests, has remained unchanged. Under him, in the decade leading up to 2010, only Zimbabwe and Haiti clocked in lower GDP growth than Italy. Whereas productivity rose by a fifth in America during the same decade, in Italy it fell by five per cent. The country comes 87th in the World Bank’s ‘Doing Business’ index, below Belarus and Mongolia. The Bank found it was harder to get a new electricity connection in Italy than in Sudan.
With a euro 1.9-trillion debt, worth 120 per cent of GDP, Italy found itself crossing the seven per cent Rubicon on bond yields last week, a development that finally forced his resignation.
In his last years in power, Berlusconi was almost a comic figure, had the consequences of his rule not been so tragic for Italy.
Over the years, Berlusconi has been accused of everything from bribery, false accounting, collusion, tax evasion, and embezzlement. Yet, the great survivor of Italian politics (Berlusconi has faced and survived a little over 50 votes of no-confidence in the legislature since 2008), was finally brought down by his mismanagement of the economy rather than corruption or sexual excess.
Many analysts warn it still may be too soon to write him off. Given the deleterious effects that economic reforms are likely to have on his business empire, Berlusconi may well keep fighting to have a say in future policies.
PAPANDREOU
George Papandreou, the euro crisis’ other victim, is in many ways the ‘model school boy; ying to Berlusconi’s roguish yang. Thoughtful, cosmopolitan, understated, he is the scion of Greece’s most high-profile political family, the equivalent of India’s Nehru-Gandhi dynasty. Both his father, Andreas, and his grandfather, George Senior, were Greek Prime Ministers multiple times, their terms in office inextricably linked to the making of modern Greece.
Giorgakis (‘little George’), as he has somewhat dismissively been nicknamed, has also spent his term as PM in historically turbulent times, but leaves after having failed to drag Greece out of the fiscal quagmire it is sinking into. Born in 1952 in America where his father was teaching at a university, having been exiled from Greece a few years earlier, Papandreou was educated in the US, Sweden and Canada and boasted university degrees from Amherst College and the London School of Economics. He was later a fellow at Harvard University as well.
His fluent English, reputedly better than his Greek, has caused him to be known as ‘George the American’ and marked him from the outset as somewhat of an outsider in Greek politics. His political record was modestly impressive. He served as foreign minister from 1999 and made a name for himself by helping improving relations with Turkey and heading the successful 2004 Greek bid for the Olympic games. He took over the reigns of the socialist PASOK party in 2004, but lost two elections before winning a sizable parliamentary majority two years earlier.
Although he came to power on a promise to stimulate the Greek economy with a multi-billion euro financial injection intended to boost jobs and growth, Papandreou found himself at the helm of a country on the verge of bankruptcy. For years, Greek governments were found to have been cooking the books to hide the extent of their fiscal indebtedness. Papandreou was forced into coming clean on the situation and seeking European Union assistance for a bailout.
In return, he had to enact a slew of harsh austerity measures that saw the streets of Athens erupt in popular protest. During his brief tenure, Papandreou repeatedly helped drag Greece back from the brink of the precipice. On October 26, he successfully negotiated a new deal with his EU counterparts that saw European bankers agree to a 50 per cent write-down on their holdings of Greek debt, as well as an additional euro 130 billion second bailout package.
However, the assistance came with even more severe austerity strings attached and it was here that the Prime Minister shocked the world by announcing his intention of holding a referendum on the matter, without any prior warning. It was a high-risk gamble, not in keeping with his reputation for considered caution. If he had succeeded in winning a popular mandate for the austerity measures, it is possible he would have gone down in the history books as Greece’s last-minute saviour.
Unfortunately for him, the move caused markets to tumble and European leaders to publically contemplate the possibility of a Greek exit from the euro. Faced with crumbling support even within his own party, Papandreou called off the referendum, but it was too late. The price for a new unity government needed to pass the bailout package was his head. Papandreou now faces a legacy notable for his referendum flip-flop, rather than his efforts to save the country.
