Berlusconi’s victory at the recent regional elections should have freed the way for three years of intense reforming activities. Once more the Italian Prime Minister has disproved doubters and critics. At the same time as in France the Government majority, also fighting a regional election, was comprehensively defeated, and while the ruling parties of the other main European countries face mounting discontent, Berlusconi has manage to extend the rule of his coalition to four new regions.

This success was not produced by economic performance. The economy fell again in the last quarter of 2009 and has been anaemic since then. Manufacturing and exports are rising, but construction remains in recession and unemployment is still rising. Business confidence is faltering. Economic policy does not and cannot provide much help. The long awaited incentive decree is much smaller than expected, and does not include the extension of the car scrappage scheme.

Increasing electoral support for the majority is probably in part the result of the perception that the rigorous economic policy of Treasury Minister Tremonti have no alternative, that they have helped protect Italy from a Greek scenario, and that the opposition has no answers. The state of the opposition, divided, worn out, without fresh ideas, had also much to do with Berlusconi’s victory.

There are no big electoral tests during the next three years and Berlusconi has a large Parliamentary majority, the solid support of his main ally, the Northern League (which want Berlusconi to stay in power and deliver fiscal federalism), and a full policy agenda. Surely the next three years will be the time in which Berlusconi will be able to see through big reforms ?

Not necessarily so. The simmering conflict within Berlusconi’s own party, PDL, has come out in the open in a spectacular way, and could do much harm in the months or even years ahead. PDL was formed through the merger of Berlusconi’s Forza Italia and of National Alliance, a right of centre party hitherto led by Gianfranco Fini. Fini and his allies do not like the dominance that Berlusconi has achieved within PDL – they believe that this betrays an understanding to share leadership. They also feel that their ideas political have been cast aside while the League’s influence grows.

Tension was clear before the Regional vote, but is now threatening to evolve into a incessant tug of war within the majority. Fini may have fewer supporters than he expected, but has enough to harm Berlusconi.

That is the reason why not long after the regional victory there has been talk of an early dissolution of Parliament. It is an event unlikely to happen, but the fact that its possibility has been seriously mentioned underlines the limits of the Prime Minister’s latest electoral exploit.

© 2010 Europrospects Ltd.