In Italy, New Wine in Old Bottles

VERDI himself could not have orchestrated it any better. Just as Italy takes over the presidency of the European Community, intending to sensitize the Italians' partners to Mediterranean issues, Iraq invades Kuwait. Italy's contention that Europe's southern flank is vulnerable now seems prescient, and the Gulf standoff is affording Prime Minister Giulio Andreotti an unprecedented opportunity to lead the community to heightened foreign policy unity. But the crisis has also momentarily distracted attention away from the Italian political class's steadfast resistance to much needed budgetary, regulatory, and political reform.

Italy is nothing if not a paradox. It stands accused of political instability, but while governments fall with alarming frequency, the constellation of cabinet members is virtually unchanging. Prime Minister Andreotti has led the government six times, and many of his Christian Democratic partners have had careers nearly as long and diverse. The lack of political regeneration suggests that, if anything, Italian politics is far too stable.

Italy has enjoyed tremendous economic and political success over the last decade. Its largest companies, such as Fiat, have emerged as world-class mulitinationals, while highly flexible and smaller firms sell products appreciated for their superior quality and design. Even the once volatile lira is now reliable, and inflation is down due to the Bank of Italy's stringent monetary policy. Although southern Italy remains mired in poverty, the country as a whole is as dynamic and wealthy as virtually any country in the world.

Terrorism, which once brought Italy to its knees, has waned considerably, and the global failure of Marxist ideology now compels the Italian Communist Party, the West's largest, to revamp its image, democratize its structures, and even scramble for a new name. These political and economic developments have spawned increased Italian activism in the international sphere.

The Italians are aggressively building a strong presence in the Soviet Union, Hungary, Yugoslavia, and Czechoslovakia, all of which see Italy as a bridge to the European Community. Italy's strategic importance to the United States is also growing, not only as a potential counterweight to a unified Germany, but more importantly, as a frontier state to a crisis-plagued and ever more militarily potent Middle East.

Foreign Minister Gianni De Michelis would like to see Europe more engaged in the Middle East for a number of reasons, including the growing tide of Arab immigrants to Europe, regional power imbalances, the proliferation of chemical and ballistic weapons, and European energy vulnerabilities. He is using the EC presidency both to forge tighter links to the Arab Cooperation Council and the Arab Maghreb Union, and to boost EC aid to the region. The Gulf crisis has accelerated this process, and the Community has just announced a $2 billion relief effort for Jordan, Turkey, and Egypt. But the Italians, like most of their partners, remain reluctant to commit ground forces to Saudi Arabia.

Yet serious domestic and international limits to Italian diplomatic leeway remain. Italy may still lack the internal vitality needed to sustain itself in the emerging ``geo-economic'' era. Its byzantine political practices are largely to blame.

The prominence of patronage politics in Italy renders effective and rapid policymaking elusive, spawns gross misallocation of resources, contributes to southern Italian impoverishment by squandering transfer payments to that declining region, stalls the implementation of European Community law, and substitutes highly politicized appointment-making for meritocracy. Competition for spoils between and even within parties frequently overwhelms sound decisionmaking, and complicates the process of bureaucratic reform and the fight against organized crime. Invariably these practices taint the country's business climate.

One is tempted to argue that, given Italy's rapid economic growth and wealth, somehow its political system has functioned effectively. But it is also true that in a united Europe, Italy's unique democracy and the frequently blatant use of government resources for party patronage rather than effective infrastructural investment will prove an enervating liability. The public-sector debt, which has reached 100 percent of annual GNP, is crowding out resources for private investment and raising serious doubts that Italy has the capacity to participate in Europe's open financial markets - which its leaders are promoting.

Government spending and political appointment-making are intricately woven into the way Italian parties broker interests, and the parties have built themselves a huge presence in the state bureaucracy. In Italy, proper connections remain vital, but the sudden appearance of the anti-immigrant, anti-southern, and anti-government ``Lega Lombarda'' movement suggest a tide swell of frustration with the government's inability to modernize at the same pace as civil society.

How then does one explain the paradox that Italy has become the strongest proponent of European integration while also being the most notorious violator of Community law? Perhaps this way. Ever tighter European integration may be the sole means at hand for the Italians to discipline their own cacophonous political tendencies, which if allowed to continue, will relegate Italy to second-rate status in the emerging global order.