Future of Berlusconi empire unresolved

THE Italian government this weekend finally made public a report suggesting ways in which the Italian Prime Minister, Silvio Berlusconi, should separate himself from his business empire.

It quickly became clear, however, that the recommendations fall far short of measures demanded by the opposition and by Mr Berlusconi's own coalition ally to resolve the conflict of interest at the heart of the government.

As the Prime Minister's office delayed releasing the report after it was presented to him last month, speculation had grown that the 'three wise men' appointed by Mr Berlusconi, had served up an unpalatable dish.

Instead the report comes closer to overcooked spaghetti - bland and lacking in bite. It concludes that it would be 'unconstitutional' to force the Prime Minister to sell his pounds 4bn Fininvest business empire. If Mr Berlusconi does not wish to sell, the 'wise men' say, he should appoint an independent trustee, whose activities would be monitored by the anti-trust authorities and the media watchdog. Both are notoriously toothless.

The day-to-day running of Fininvest is already in the hands of a nominally independent administrator - a top Fininvest executive and close friend of the Prime Minister. If therefore the government manages to push through legislation based on the report, very little will have changed. Even so, according to government sources, the Prime Minister is not pleased. Mr Berlusconi reportedly believes the suggested system of checks and controls to be too complex.

Neither is the opposition satisfied. Mario Segni, the leader of the small centrist Pact for Italy, said: 'This is a complete joke.' Cesare Salvi, of the Reform Communist PDS, said: 'It is a step forward, but we need to establish the complete incompatibility between holding the premiership and being in big business.'

The problem with any solution short of an American- style blind trust (where the politician's business interests are sold off and the resulting fund administered for him) is that Mr Berlusconi's holdings are so vast and diverse that almost any area of government policy may affect them.

When Mr Berlusconi swept to power last spring, much of his support came from small businessmen and the middle class. They were attracted particularly by the government's claim to have the confidence of the financial markets - an important factor in a country where small savers traditionally invest heavily in government bonds. Figures published yesterday showed instead how badly the continual political turbulence surrounding this administration has hit small savers. The left- wing daily La Repubblica calculated that both shares and a particular government bond issue snapped up by many families late last year had lost almost a quarter of their value since the government took office in May.

Behind the figures is a very simple - and, for Mr Berlusconi, potentially very dangerous - fact: many of the comfortably off middle classes and small investors who voted him into power are getting their fingers badly burned.