The return of Silvio Berlusconi: Is the euro in trouble again?

Silvio Berlusconi: The once and future prime minister?

(Image credit: Dan Kitwood/Getty Images)

last updated 11 January 2015

Silvio Berlusconi, the former prime minister of Italy, just doesn't seem to get the hint. Mere months after Berlusconi was publicly shamed by a fraud conviction, this weekend his People of Liberty party withdrew its support for Berlusconi's successor, Mario Monti, forcing new elections in February in which Berlusconi will try to return to power. The prospect of Berlusconi's resurrection drew barely suppressed cries of "Mamma mia!" in capitals across Europe, with many fearing he could derail a slate of belt-tightening reforms Monti had pushed through to shore up Italy's finances. Berlusconi has been accused of a lot of things — including having sex with an underage prostitute and engaging in numerous acts of corruption — but now commentators are beginning to suspect that he's not even human, say Carsten Vokery and Philipp Wittrock at Germany's Der Spiegel:

Italy's least serious politician is back. And Europe is groaning in displeasure. The French leftist paper Libération wrote "The Mummy Returns," a reference to a 2001 movie of the same name. And the otherwise dour German radio broadcaster Deutschlandfunk noted, "It is like a horror film: The undead keep coming back."

The markets were even less pleased. After months of relative calm, Italian borrowing costs shot up, sparking fears that the country's financial troubles could return. "The ability of Silvio Berlusconi to spook investors knows no bounds," Nicholas Spiro, managing director of Spiro Sovereign Strategy, tells Bloomberg Businessweek. "He epitomizes the dysfunctional nature of Italian politics, with its discredited leaders and unstable governments."

There are even concerns that fresh political turmoil in Italy could plunge the entire eurozone back into crisis mode. While many have noted that Berlusconi's party remains unpopular, and that he has only a slim chance of becoming prime minister once more, populist forces unleashed by the election could still awaken bond market furies that have been lulled in recent months. In essence, Berlusconi's campaign could "put Italy's fate back into the hands of speculators," say Vokery and Wittrock.

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However, there are signs that a strengthened Europe can withstand an element as volatile as Belusconi. Markets reacted negatively to the news, but they didn't panic, says Neil Irwin at The Washington Post:

Markets were doing what markets do: Adjusting prices based on the latest news about a country with a long history of unstable politics. But what investors didn’t do is immediately extrapolate from "Italy's political situation could be hairy for the next few months" to "and this will cause the entire eurozone to unravel."

Ryu Spaeth is deputy editor at TheWeek.com. Follow him on Twitter.