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Monti Tackles Italy Corruption as Scandals Taint Parties

Photographer: Rex Features via AP Images

Italy's Prime Minister Mario Monti in Rome. Close

Italy's Prime Minister Mario Monti in Rome.

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Photographer: Rex Features via AP Images

Italy's Prime Minister Mario Monti in Rome.

Prime Minister Mario Monti is shifting his focus from overhauling Italy’s economy to tackling corruption, a problem highlighted by the recent resignation of one of the country’s best-known political leaders amid a party- financing scandal.

Monti’s government is readying a package of anti-corruption measures, including broadening the criminal definition of corruption to include cases in the private sector and tightening procedures to prevent failed prosecutions due to the statute of limitations, said a person with knowledge of the proposals, who declined to be identified because an official announcement hasn’t been made yet.

Officials from the nation’s three biggest parties agreed last night on a joint proposal to make the use of public funding more transparent. Justice Minister Paola Severino said April 7 the government is “ready to intervene” on party financing unless Parliament takes action.

The Council of Europe’s Group of States Against Corruption, known as GRECO, called on Italy yesterday to amend its criminal code in areas such as party financing and corruption penalties. That came after Umberto Bossi resigned as head of the Northern League April 5, caught up in the biggest wave of corruption scandals since the “Bribesville” cases in the 1990s led to the demise of Italy’s dominant political parties.

Photographer: Andrew Medichini/AP Photo

Italian Prime Minister, Mario Monti during a news conference, on April 4, 2012, in Rome. Close

Italian Prime Minister, Mario Monti during a news conference, on April 4, 2012, in Rome.

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Photographer: Andrew Medichini/AP Photo

Italian Prime Minister, Mario Monti during a news conference, on April 4, 2012, in Rome.

Fighting fraud “is a priority for the Monti government,” Democratic Party Deputy Donatella Ferranti said in an interview yesterday. “It weighs on the economy, on the recovery, but also on the credibility of our country abroad.”

Attracting Investment

The Democrats, the People of Liberty and the centrist Third Way are the three main parties in a broad coalition set up when Monti, 69, took over as unelected prime minister in November.

Under their plan to make the use of public funding more transparent, a special supervisory commission will be set up to monitor parties’ balance sheets, which will be also published on the Internet, and donations above 5,000 euros will have to be made public, according to an e-mailed statement from the Democratic Party.

The plan “is more likely to be a fudge than any serious reform,” James Walston, a professor of politics at the American University in Rome, wrote in an e-mail before the announcement was made. “None of the parties is willing to give up public support nor their control over many public resources.”

Monti said March 17 that Chancellor Angela Merkel told him increased efforts to fight corruption would lure more German investment to Italy. “It’s essential for the government to attract foreign investment,” he said.

Corruption in Italy amounts to a “hidden tax” of 1,000 euros ($1,310) to 1,500 euros per person each year, Ferranti said. Italy scored the worst of all euro-area countries except Greece in Transparency International’s global corruption ranking last year. Corruption accounts for 1 percent of the European Union’s gross domestic product, which would amount to 16 billion euros for Italy, the European Commission said in a June 6 report. That compares to damages of 90 million euros won by Italy’s state audit court in corruption rulings last year, according to a Feb. 16 report.

Berlusconi

While the media has focused mostly on Prime Minister Silvio Berlusconi’s legal battles, including a case with corruption charges, allegations have been leveled against officials from all of the country’s main parties this year.

Ten of the 80 legislators in Lombardy’s regional assembly are being probed, several for alleged kickbacks, including Speaker Davide Boni. Berlusconi has maintained his innocence of all charges in cases against him. Boni said March 20 he’s “totally extraneous” to any alleged wrongdoing.

Bossi’s son Renzo resigned from the regional legislature April 10 amid a criminal investigation that led to allegations that Northern League funds were siphoned off to the Bossi family. Neither Umberto Bossi nor Renzo Bossi is under investigation and both have denied using party funds for personal expenses.

There are “critical shortcomings in the party funding system of Italy which must be addressed as a matter of priority,” GRECO said yesterday. Italian parties spent 570 million euros from 1994 to 2008 out of 2.25 billion euros of public financing, the GRECO report said.

Influence Peddling

While Italy signed the Criminal Law Convention on Corruption in 1999, Parliament hasn’t fully ratified it. GRECO has recommended that Italy classify private-sector corruption and influence peddling as crimes, and lengthen the statute of limitations for corruption offenses.

One of Monti’s first tasks when he took office was to clean house at state-controlled defense company Finmeccanica SpA (FNC), whose chairman and other officials were involved in corruption probes. Chairman Pier Francesco Guarguaglini quit in December amid a probe involving a company unit run by his wife. Guarguaglini and his wife Marina Grossi have repeatedly denied any wrongdoing. Finmeccanica isn’t under probe.

“Illegality, corruption and graft are widespread and their size is much larger than what comes to the surface,” Luigi Giampaolino, chairman of the state audit court, said Feb. 16.

Italy came in 69th in the Corruption Perceptions Index ranking, Berlin-based Transparency International said Dec. 1, placing the country level with Ghana and lower than Saudi Arabia. Seventeen percent of Italians said they were asked to pay a kickback in the previous 12 months, a Eurobarometer poll in 2009 showed, almost double the European average.

The government plans to present an amendment on April 17 to address the GRECO recommendations, the person familiar said.

To contact the reporters on this story: Marco Bertacche in Milan at mbertacche@bloomberg.net Chiara Vasarri in Rome at cvasarri@bloomberg.net

To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net

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