Is Berlusconi really set to lead Italy again?

He’s back.

A year after his last stint as prime minister ended in the ignominy of financial crisis and sex scandals, Silvio Berlusconi has announced that he intends to become leader of Italy once again.

His announcement on Saturday that he will fight the national election expected to be held in February precipitated the surprise resignation of Mario Monti, the technocrat who has governed the country since Mr. Berlusconi’s fall from grace.

It also pitched the country – and the rest of Europe – into fresh tumult and uncertainty, with politicians from Berlin to Paris to Brussels warning of disaster if Italy strays from the austerity cuts and structural reforms that Mr Monti has pursued over the last 13 months.

The key questions now are: Does Berlusconi stand a reasonable chance of returning to power for the fourth time in two decades, and what would it mean for Italy?

A long shot...

On the first question, the opinion polls at first glance offer him little hope.

The polls show that his People of Freedom party currently has around 15 percent of the vote, against the 35 percent enjoyed by its main challenger, the center-left Democratic Party.

But commentators – and the Italian public – have learned never to write off Berlusconi’s chances.

He has an uncanny ability to tap into the mindset of the man and the woman in the street, he is a seasoned and in many ways brilliant election campaigner, and he can throw the full weight of his sprawling media empire behind his bid, from television stations to magazines and newspapers.

“He’s a very good performer, he has lots of favors he can call in, and he has huge resources, so I think he could do quite well,” says Professor James Walston, a political scientist at the American University of Rome.

Berlusconi said on Tuesday that he was hoping to rebuild a once strong but now-lapsed alliance with the Northern League, a populist and anti-European party that in the past campaigned for secession for Italy’s wealthy north.

Most analysts see the center-left winning the lower house of parliament, but give Berlusconi a fighting chance of blocking the Democratic Party’s hold on the Senate, the upper house.

That would enable him to exert significant control on parliamentary business and the passage of legislation.

... but a high risk

If “Il Cavaliere,” or The Knight, as Berlusconi is known, did manage to win the election, he is likely to roll back many of the painful and unpopular reforms initiated by Monti and his unelected administration of technocrats.

The election may not be for more than two months, but alarm bells started ringing on Monday, the first day of trading on the stock exchange in Milan, Italy’s financial capital, since the political drama that unfolded at the weekend.

Stocks closed down more than 2 percent and the spread between the yields on Italian and German sovereign bonds – seen as a key barometer of investor confidence – widened to more than 360 basis points, having been below 300 points before Monti’s resignation.

Fears that Berlusconi fails to grasp the dimensions of Italy’s economic malaise deepened on Tuesday when he said that worries about the spread were “an invention and a swindle” that had been wrongly used to bring down his government.

"Who cares about the spread?" the media mogul said. "The spread is a swindle and an invention which they used to defeat a government majority voted for by Italians that was governing the country.”

A chilly reception from Europe

Warnings of the risks that Italians run by reelecting Berlusconi came from across Europe, including the European Central Bank, the European Commission, and ministers in France and Germany.

The reaction from the European press was no less negative. “The Mummy Returns” was the headline in Liberation, a French newspaper, while Bild, the German daily, predicted a resurgence of the “bunga bunga” culture of showgirls and sex scandals that marked Berlusconi’s last stint in office.

The prospect of a comeback was also met with dismay and disbelief by Famiglia Cristiana, an influential Catholic magazine. “The dinosaur returns and throws the country into chaos,” said the magazine's lead editorial. “The penny whistler is playing once again, with tantalizing promises... that will halt the virtuous road towards reform.”

In a front page editorial, Corriere della Sera said that as Berlusconi strives for a fourth term, “the world watches us with incredulity."

Monti will officially step down after parliament passes the 2013 budget, which is expected in the days before Christmas. Elections must then be held within 60 days, with the date likely to be Feb. 17 or 24.

That means two months of hectic political jousting, market volatility, and soul-searching over the future of Italy.

“Journalists and political scientists,” says Professor Walston, "are going to have fun."