ITALIAN SITUATION

Created: 3/27/1981

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NATIONAL Ffflliil'IN ASSESSMENT aXTtR1

for ' CEfnUVL lMiiLLIClKOi A'JIMCY

ITALIAN SITUATION

Sharp divisions within Prim* Hinieter Forlani'c Cfj-ieiian Devoaratio-lad four party coalitionn

tha gcnitrnrcU and tha peuarful Camuniet opposition have peevantad effective handling of tha ooviitry'a chronic econcio problemo. Hioo in office primarily bacauaa none of the partiea eame toovernment crisis before important national referendum* and looal election* in May and June. Ten*ions are euch,

thing* ma Id fall apart at virtually any

time.

ajority ofotes in tht Chaaeber of Deputies, the govensnent has been unable because of the coasting interests of the parties to do much more than keep itself afloat. The leadership of the Socialist party--which provides the goverrssent's balance of power in parliaaacnt--ls dissatisfied with its subordinate role to the Christian Dtssocrats. The Socialists are craaaitted to drawing sharp distinctions between thestselvtts and their partners, hoping to attract increased voter support in the elections that would bolster their hope touture govennent. hhile must Christian Dtnsocrats see their alliance with Lha Socialists as th* best way of keeping the Coatnunists out of the govenvnent, they are increasingly resentful of constant Socialist criticism of their leadership. Theto relaunch their own campaign forcUrect governing role--ore letennined to drive the wedge deeper between the Christian Destocrats and Socialists. They have relentlessly attacked both parties for the failures of the For lan! gqve meant, while calling on the ^Socialists to close ranks with then against the Christian Detnocrats.

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Since llie Forlanl privvnuaciit tool; office last (Vtubcr, these (Struggles have hece ployed outackdrop oi alleged Christian Ikwratic invoivuuent lit tux fraud scandals, prohleias iucmmctitV. relief effort in response to last winter's earthquake in southern Italy, and the failure of it* campaign to eradicate political terrorism. Mutt recently, thehave been at odds over Budget Minister la Haifa's projected three-Kir economic plan. Tbe plan was necessitated bytrccntising trade deficit fueled by laore rapid occnonuc growth than its competitors, an uncontrolled budget deficit, and rapid wage increases. Those problems have been ccatplicatcdash ol strikes, primarily in health, education and transportation sectors, underlining worker detenus for the renegotiation of existing contracts. Despite thesech of tho parties-looking forward to elections--lias been unwilling to compromise. esult, the govrnncnt's comfortable parliamentary majority lias disappeared on numerous occasions, when deputies have either absented themselves on key votes or lined up with the opposition. This anomalous situation has prompted discussion of both constitutional amendments that might facilitate government action on critical problems and aenincnt ofndependent nf narties, that might he more effective than the current arrangement.

The government has resorted to roll-call confidence votes on certain (luestions to stem the tide of defections from its ranks. This gambit thus far has proven successful because-despite the parties' lack of conmTjacnt to the coalition-they are aware that tho timing of the coming crisis is of utmost importance. The parties arc reluctant to bring down the governaent before their plans and platforms for the parliamentary elections that could Mil follow the fall of Forlani's genrerrmmt are well in hand. ; the Socialists seem content to hamper away at ftrlani without withdrawing their support, at least until after the Socialist Congress in mid-April, when the leadership's policies are expected to gait, official party Theocrnts--under virtual siege for many months-would like to putrisis as long as possible in tho hope they can exploit their long history as Washington's principal interlocutor and convince the Socialists to withdraw their challenge. The Ccaaxmists would like to keep the govenssent in office lone enough to demonstrate to the public that" Democrats and Snrialiatt cannot govern Italy effectively without rrmunist

assistance.

The government nevertheless has been reluctant tots "vote of confident" strategyaifa's plan fearing it wouldest on critical bread and butter issues. Consequently, Minister has opted to bypass the parliament--at least temporarily--and address Kornmc devaluing the lira's IMS central rate and relying on the Bank of Italy to tighten up credit. This he hopes will buy timeaifa's Pl""ij wAcdorm that maximizes its slim chances ofapproval. Given the current level of politicalrlam undoubtodly would prefer to postpone parliamentary consideration of new measures at least until after June. Tbe budget or some interim arrangeacnts must. howewr^be appnivcd by the end of April, and ithewoes will comeead at that time.

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