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Italian Coalition Seeks Economic Action to End Political Paralysis

By Daniel Williams
The Washington Post

Italy's new government faces a series of tough economic decisions that will indicate whether the precarious center-left coalition soon to take power can withstand the strain of tackling problems left unresolved during the country's recent period of political paralysis.

Important decisions have been delayed during two years of sterile political maneuvering within the country's fractious political establishment. Issues such as electoral reform, corruption and control of the media dominated inconclusive debate, while economic reform lay mostly dormant. Delays in implementing change have endangered Italy's place in a more tightly unified European Union as well as in the fast-developing, interconnected world of liberalized economies.

The tasks in store for the Olive Tree alliance include privatization of some of Italy's key state-owned industries, including STET, the country's telecommunications company, and the banking system. Reductions in government spending are also in store, although it is not clear where and how.

How the government, led by centrist economist Romano Prodi, resolves these issues will clarify the true identity of the center-left Olive Tree. Is it more center than left or the other way around? In particular, just how committed to liberal economic life is the Democratic Party of the Left, the party of former Communists that is the coalition's biggest faction? That party is populated by politicians who spent their careers trying to build a more centralized state, with control of key industries and an increase in government employees.

A further complication lies in the fact that the Olive Tree relies on the old-line Marxists of the Communist Refoundation Party, which has opposed both privatization and budget cuts, for its slim four-seat majority in Parliament. Its leader, Fausto Bertinotti, has pledged his party will supply votes so that the Olive Tree can take power, but afterward, the government will be on its own.

The chances that a government that relies on former and continuing Communists will take the road toward free markets and shrunken government is regarded as doubtful by some Italians. "The numerous proposals presented by the Olive Tree on these themes are undoubtedly serious and articulate," wrote Sole 24 Ore, Italy's leading financial newspaper. "However, (there has been) a certain reticence regarding the theme of "sacrifice' needed to realize these proposals."

In any event, it appears that Italy will not be among the first participants in European monetary union and lags behind other Western countries in the creation of communications networks that have become the hallmark of business development around the world. In comparison with nations that have taken advantage of the information superhighway, Italy is on an information cobblestone street.