Italy: Dreams of La Dolce Vita

If you read about Italy in the financial press, you might be excused for thinking that the days of la dolce vita, literally the sweet life, have gone very sour. The numbers are terrible: zero growth, record deficits and staggering unemployment. The main issue raised by challenger Romano Prodi against incumbent Prime Minister Silvio Berlusconi in this month's elections was this woeful record. (Never mind that Berlusconi is a self-made man worth billions; many of the other corporate titans in Italy concluded he was bad for business.) Yet--Berlusconi very nearly won. The Italian supreme court ruled last week that he fell short of controlling the lower house of Parliament by a mere 25,000 votes out of 38 million. Which shows that half of Italy voted for him, and suggests that many of those same people concluded that life in la bella Italia is still sweet.

Are they drinking too much limoncello--or Kool-Aid--or what? Can the euro zone put up with a nation largely populated by delusional optimists? If much of the country is unconvinced that change is needed, Prodi's weak leftist coalition is going to have problems trying to cajole the public into accepting tougher reforms than Berlusconi's center-right government was willing to impose, as the outgoing prime minister has been quick to note. "I think a lot of people live in denial," says Andrea Mandel-Mantello, partner of AdviCorp, an investment bank based in Rome. "There is a mentality to just get by rather than strive for more. Instead we just lower our standards."

But there's also another factor: Italy's long postwar history of doomsday predictions that didn't come true. In 2001, when Berlusconi last came to power, the main fear was that he'd use his media holdings to boost his political advantage. As it turned out, the mogul's TV and print publications mostly painted him as a scoundrel. In 1996, when Romano Prodi first beat Berlusconi, no outsiders thought the country could possibly manage the reforms required to join the euro zone. Before that, naysayers always found omens of apocalyptic proportions. In 1992, Italy recovered from its temporary suspension from the European monetary system when no one said it could. In the 1970s and '80s, it was national terrorism and civil unrest that threatened disaster.

As for today's long-awaited, much-needed (and painful) reforms? Italians sometimes surprise even themselves when new laws are imposed. Six years ago, who'd have thought they'd obey helmet regulations when riding their Vespas? Or stop smoking their MS cigarettes with their meals? But you won't see a bare head on a moto in Milan these days, and the air in any Roman trattoria is as clean as it would be in San Francisco. If Italians can learn so quickly to do without those classic appurtenances of la bella figura, maybe they can be convinced of the need to impose some order on the country's economic figures, too. But first they must believe such stiff medicine is indeed necessary.