Climax of Italy's TV war

On Sunday, Italy holds a referendum to decide whether Berlusconi should sell his TV channels.

How the pendulum has swung for Silvio Berlusconi. Eighteen months ago, when the smiling face of Italian private television entered politics on a mission to "save the country from the Communists", he seemed to wear an aura of success that rubbed off on everything he touched.

It could have been a script from one of the soap operas he broadcasts. He was sun-tanned, charismatic, impeccably dressed. Promising jobs and prosperity, his party swept to power after a dramatic three-month campaign. The TV stations which had propelled him to prominence now acted as cheer- leaders for his political ambitions.

The corporate structure of his company, Fininvest, took over the levers of government, with himself as prime minister and friends and associates as ministers and high functionaries. This was a new revolution, and political scientists began inventing new theories of the entrepreneur-as-politician and the corporation-as-state. Italy, it seemed, was to become the mirror image of the colourful, upbeat world that Mr Berlusconi had created on the small screen.

That vision now seems no more than an empty illusion. Mr Berlusconi is out of power and out of favour. The medium that brought him so much success could be about to wreak his downfall. This Sunday, Italian voters will be asked to participate in a slew of referendums, three of which pose a direct threat to Mr Berlusconi's hegemony over the airwaves. If they are passed, Mr Berlusconi will have to sell two of his three network channels and drop much of his TV advertising business, including the right to interrupt prime-time Hollywood film broadcasts.

These were referendums that Mr Berlusconi wanted to avoid at all costs, and they indicate how far he has fallen from grace. Indeed, so prickly has the political landscape become for him that it almost does not matter what the result is: it looks certain he will have to sell part of his media empire. He has already been openly courting buyers, including Rupert Murdoch, and appears only to be waiting for the vote to be over to start dealing with the nuts and bolts.

Three factors have brought Mr Berlusconi to this uncomfortable crossroads: the decline in his political fortunes, the intolerance shown towards his clashing interests in politics and business, and the pressing need to reform and update the regulations governing TV in Italy.

Part of the reason Mr Berlusconi fell from favour when he was prime minister last year was because he failed to address the latter two issues. On taking power he promised to establish guarantees that would resolve the question of his conflict of interests, and he set up a parliamentary Culture Commission to look at the balance between private and public broadcasting.

But nothing happened on either front, prompting Mr Berlusconi's allies in the federalist Northern League to accuse him of favouring his own business interests, and then, in December, to walk out of his coalition and forcing him to resign.

For the first few months of this year, Mr Berlusconi seemed to be carried along by the belief that voters were behind him - a belief fuelled by the unshakeable confidence he had in the propaganda power of his TV stations. Even left-wing opponents were convinced that their persistent bad luck with the electorate was due to the Big Brother effect of Fininvest.

But a rude shock awaited Mr Berlusconi in April's regional elections, when his centre-right Freedom Alliance was beaten by the centre-left. Partly this was because Italian voters were looking for a more cautious, centrist kind of politics, but partly also because they did not believe in the Berlusconi magic any more. The prosperity and stability he had promised simply did not arrive, and they were not prepared to believe his line that he had been a victim of forces beyond his control.

One of Mr Berlusconi's problems was that he could not divorce his own interests from his political programme. By now the referendums were already in the offing, and when he clamoured for early general elections everyone assumed this was his way of trying to delay or even scrap the plebiscite on media ownership. Similarly, when he attacked the anti-corruption magistrates in Milan as stooges of the political left, everyone assumed he was diverting attention from the magistrates' investigations into his own business practices.

As Mr Berlusconi's position weakened, so the anomalies of the Italian broadcasting system came to the fore. The reason Mr Berlusconi took virtual monopoly control of the private sector was because the 1990 broadcasting act was tailor-made for him by an old governing order with whom he had close links. Everyone, Mr Berlusconi's centre-right allies included, realise that change is needed fast to bring Italy into the era of satellite and cable without concentrating power in the hands of one man. Referendums are not the most suitable means of achieving this end, and parliament will have to haggle over a new broadcasting law regardless of Sunday's result. The most the vote can achieve is to indicate the direction of the reforms - and give the likes of Rupert Murdoch some indication of their prospects in the Italian market.

The more immediate effect of the referendums will be to give a political judgement on Mr Berlusconi as a public figure. If he wins, it will enable him to sell off parts of his empire from a position of strength and give him the boost he badly needs to re-inject confidence in the centre-right as it heads towards general elections in the autumn or next spring. If he loses, it will spell the end of his glory days in business, and could finish him off politically. For months he has come under pressure from his allies to sort out his conflicts of interest, because they are seen as an electoral liability. Ever since the regional elections there has been talk of replacing him at the head of the Freedom Alliance with a more moderate figure such as the former anti-corruption judge Antonio Di Pietro.

Mr Berlusconi is a man of considerable guile and energy, and probably will not go quite that easily. But he could well find on Sunday that his dream of a country run like Fininvest writ large shattered once and for all.