Silvio Berlusconi

ATHENS, Greece — Europe’s financial crisis eased Thursday as Greece installed a respected economist to replace its prime minister and Italy appeared poised to do the same — both hoping that monetary experts can do better than the politicians who drove their nations so deeply into debt.

The announcement in Athens — coupled with the prospect that volatile Italian Prime Minister Silvio Berlusconi will be ushered out soon — quieted market fears, at least for now, that turmoil in Europe could threaten the global economy.

But significant challenges remain in both debt-heavy Mediterranean countries.

Greece’s new prime minister, Lucas Papademos, a former vice president of the European Central Bank, must quickly secure the crucial loan installment without which his country will go bankrupt before Christmas, and approve the EU’s $177 billion bailout deal.

In Italy, lawmakers have to pass new austerity measures over the next few days. However, expectations that respected economist Mario Monti will lead an interim technocratic government after Berlusconi goes helped lift the gloom.

Monti, 68, now heads Milan’s Bocconi University, but he made his reputation as the European Union competition commissioner who blocked General Electric’s takeover of Honeywell.

Still, the European Union warned that the 17-nation eurozone could slip back into “a deep and prolonged” recession next year amid the debt crisis. The European Commission predicted the eurozone will grow a pallid 0.5 percent in 2012 — much less than its earlier forecast of 1.8 percent.

Europe has already bailed out Greece, Portugal and Ireland — but together they make up only about 6 percent of the eurozone’s economic output, in contrast to Italy’s 17 percent. Italy, the eurozone’s third-largest economy, is considered too big for Europe to bail out. It has a mountain of debt — $2.6 trillion — and a substantial portion of that needs to be refinanced in the next few years.

The 64-year-old Papademos, who also served as Bank of Greece governor, will lead a government backed by both Greece’s governing Socialists and the opposition conservatives until early elections, tentatively set for February.

Many Greeks are angry after 20 months of government austerity measures, including repeated salary and pension cuts and tax hikes to meet the conditions of the country’s first bailout. Despite the belt-tightening, the Socialist government repeatedly missed its financial targets as Greece fell into a deep recession, amid rapidly rising unemployment.

Papademos’ appointment followed 10 days of political turmoil triggered by Papandreou’s shock announcement that he wanted to put the latest European bailout deal to a referendum. Fears that the agreement would be defeated led to mayhem on international markets and angered both European leaders and his own Socialist lawmakers. 

Silvio Berlusconi survived sex scandals and corruption trials. Tawdry accounts of sexy “bunga bunga” parties turned him into an international laughing stock. Prosecutors pursued him over a mind-boggling array of suspected improprieties.

Every time he seemed finished, the perma-tanned premier managed to miraculously bounce back.

But he just couldn’t beat the markets.

Berlusconi announced Tuesday he would resign after parliament passes economic reforms demanded by the European Union. He acted in the face of a relentless investor attack on Italy’s government bonds and crumbling support in parliament, almost certainly ending a political career in which he achieved the feat of becoming his nation’s longest-serving premier.

The media baron dominated Italian politics for nearly two decades. He served as premier three times over the past 17 years — a charismatic if polarizing figure who sold Italians a dream of prosperity with his own personal story of transformation from cruise-ship crooner to Italy’s richest man. He also owns AC Milan, one of Italy’s famous soccer clubs.

But in his last years in power, he became almost a grotesque caricature of the charming billionaire who cast a spell over his nation.

The hair transplants and plastic surgery became all too obvious. His reputation as a seducer gave way to allegations of trysts with prostitutes and underage girls. He embarrassed Italy with jaw-dropping gaffes at international summits.
Accusations grew that he was in politics not for Italy’s sake but for his own — to boost his business interests and change laws to shield himself from prosecution.

As pressure for his resignation grew, he remained defiant, labeling opponents “communists” to be kept at bay and prosecutors as “terrorists” defying the will of the people who elected him.

Even as his allies were defecting, he anointed himself Italy’s savior at the close of the Group of 20 summit in Cannes, France, last week.

“I feel a duty to continue these things,” he said. “This is a great duty and sacrifice for me. Here, at the Cannes summit, I looked around, and I don’t see anyone in Italy who is up to representing our country. I asked myself, who could represent Italy if I weren’t there?”

But he had only so many political lives. The magnetic smile, the confident wisecracking, the perennial optimism were no longer reassuring.

When Italy became the new focus of the eurozone debt crisis, the financial markets delivered their verdict: Berlusconi himself was the problem. He lacked the political clout to quickly pass the needed measures to boost growth and cut debt. To use a metaphor from his beloved sport of soccer, it was game over.

But ousting Berlusconi wasn’t easy.

“He’s not the retiring type. It’s very much a personal trait. He really thinks he’s the best in the world,” said James Walston, a professor of political science at Rome’s American University.

The ultimate fear that clinched political change was that Italy would not be able to pay for its enormous $2.6 trillion debt. That is too expensive for Europe to handle and could trigger a default that would break up the 17-nation eurozone and drag down the global economy.

Berlusconi had used television and his own wealth to build a political career. He boasted of his riches and kept a lavish lifestyle that included partying with young women.

“I’m no saint,” he said defiantly after his wife of almost 20 years announced she was seeking a divorce in 2009.

But the scandals picked up steam. First a self-described call girl said she went to bed with Berlusconi on the night that Barack Obama was elected U.S. president.

Then came embarrassing criminal charges that he had sex with an underage Moroccan girl nicknamed Ruby Rubacuori (“Rudy the Heart-Stealer”) and used his office to cover it up. The trial is in progress.

While he repeatedly denied any wrongdoing, the 75-year-old Berlusconi was becoming increasingly reclusive in public as he sought to defend himself in three trials and several other criminal investigations.

The trials — the sex case, tax fraud and corruption — will continue, but once out of office, he will lose the ability to delay hearings as he has been doing, citing conflicts with official business.

Berlusconi had the power to inspire both fierce loyalty and equally fierce opposition. To his admirers, the conservative leader was a capable statesman who sought to make Italy rich and powerful. To his critics, he was a populist whose immense media and political power made him a threat to democracy.

That was perhaps never more apparent than when Berlusconi was attacked by an unstable man during a political rally in Milan in 2009.

The attacker threw a souvenir statuette of Milan’s cathedral at the premier’s face, leaving him with a fractured nose, two broken teeth and lip cuts. Images of Berlusconi’s bloody, shocked face drew sympathy and solidarity even among critics, but his attacker also generated a storm of praise on Facebook and YouTube.
Berlusconi often boasted of his success with women. He entertained friends and world leaders alike at his villas on the Emerald Coast of Sardinia.

Berlusconi reveled in straying from political etiquette.

He once famously sported a bandana when receiving British Prime Minister Tony Blair in Sardinia. (The reason, it turned out later, was to conceal a recent hair transplant.)

He posed for an international summit’s family photo making an Italian gesture — which can be offensive or superstitious depending on the circumstances — in which the index and pinkie fingers are pointed like horns. And he caused an international outcry in 2003 when he compared a German EU parliament lawmaker to a Nazi camp guard.

Berlusconi became rich after breaking the state monopoly on television in the late 1970s. Twenty-five years later, his Mediaset network was a cash cow thanks to game shows, scantily clad girls and imported U.S. sitcoms in deals that were the source of some of his criminal prosecutions. Together with the state network that he effectively controlled as premier, he held 90 percent of Italy’s TV market.

When the “Clean Hands” corruption scandals broke in the 1990s, wiping out the entire political establishment, he founded his own party in 1994 and named it after a soccer cheer: Forza Italia. He was elected premier three months later by Italians seeking a break from the past.

That government was short-lived after his Northern League ally pulled out later that year. But he was re-elected two more times: in 2001, when his government served out an entire 5-year term, and again in 2008.

Summing up his appeal, he said: “Most Italians in their hearts would like to be like me and see themselves in me and in how I behave.”

But that appeal, according to all opinion polls, began to wane when the economy failed to grow, unemployment began creeping up and job prospects for young
people disappeared.

At the same time, he was devoting much of his political capital to protect his own interests. Even as the debt crisis worsened, he pushed legislation to limit publication of wiretaps before trial, citing himself as a victim, and tried to include a measure in an austerity package that would have allowed his family investment company to dodge a heavy fine.

Berlusconi’s departure leaves major questions about the future of his party. It has been weakened by prominent defections and he himself had repeatedly said he would not seek re-election. His hand-picked successor, his former justice minister Angelino Alfano, lacks Berlusconi’s dynamism.