IV. POLITICAL ENVIRONMENT NATURE OF THE BILATERAL RELATIONSHIP WITH THE UNITED STATES Italy is an important economic and strategic ally of the United States. Italy's proximity to conflicts in the Balkans, the Mediterranean, and North Africa underscores its strategic significance. On a bilateral basis, Italy is the most important European space partner of the United States. Reform of the Italian economy, the fifth largest industrialized economy in the world, is vital to U.S. interests. Hopefully reform will lead to a more outspoken, market-oriented Italian voice within the EU. A solid economic recovery in Italy is essential for European and global growth and to burden sharing on security and international assistance. The United States and Italy enjoy over 20 billion dollars annually in two-way trade. U.S. companies have 14 billion dollars invested in Italy. Reform efforts, including greater transparency in government procurement and the privatization process will benefit the Italian economy and should provide many new opportunities for U.S.-Italian business cooperation. Continued progress on intellectual property rights protection is another area of special interest. The economic policy of the current Italian government may be more in tune with the United States philosophically than any of its predecessors. The Berlusconi government's economic program emphasizes economic growth with job creation but also the reduction of Italy's high budget deficit and state intervention in the economy. Likewise, Prime Minister Berlusconi has embraced basic tenets of U.S. foreign policy (e.g. enlargement of the democratic community, stimulation of world economic growth, and promotion of collective security). MAJOR POLITICAL ISSUES AFFECTING BUSINESS CLIMATE Italy is in the process of a historic political transition. In the national elections of March 27-28, 1994, voters rejected the old governing coalition of the Christian Democrats, Socialists, Social Democrats, and Liberal parties that had governed Italy for decades. Media mogul Silvio Berlusconi, in his first run for elective office, came to power after the March 1994 elections by forming his own political organization (Forza Italia) and putting together a coalition of federalist, centrist, and conservative forces. In addition to Forza Italia, the other major parties in Berlusconi's coalition are the pro-federalist Northern League (Lega Nord) and the conservative National Alliance/Italian Social Movement (AN/MSI) party. BRIEF SYNOPSIS OF POLITICAL SYSTEM, MAJOR POLITICAL PARTIES Italy is a republic whose government is divided into three spheres of power: the Parliament, the Government (which performs an executive function), and the Judicial. The President of the Republic (who has limited responsibilities in all three spheres) and the constitutional court help to maintain an equilibrium between these branches. The most important function of the President of the Republic is to designate who is to form the government and to dissolve parliament. Parliament consists of the Chamber of Deputies and the Senate. Over time, the Chamber of Deputies has become the leading body, but each is equivalent in power. A large part of the work of Parliament takes place in committees. The executive functions are exercised by the Government, which consists of the Council of Ministers and the President of the Council. The President of the Council is the Prime Minister and the leading figure in the government. The power of the President of the Council is derived largely from his chairing the council and setting its agenda, as well as signing legislation. There are thirty-one ministers, nine of which are without portfolio. The ministries form the basic structure of the state's public administration by implementing the policies and laws of the state. Ministers, although appointed by the president of the council, usually have independent power bases within the parliament and the parties. The justice system consists of four branches (constitutional, common, administrative, and special), which are essentially independent of each other. Although the power of the State is primarily centralized, the twenty regions have authority for the administration of some public functions and for enacting certain specific legislation (e.g. healthcare). An important factor in the Government and the State is the power of the political parties. Parties are not provided for in the constitution but are an essential part of the political structure. Because no party commanded a parliamentary majority for almost 45 years, coalition government has been the norm. Following the fall of communism and revelations about widespread corruption in government, the political landscape in Italy changed significantly with the right of center "Freedom Alliance" coming to power in March 1994. In that March 1994 election, the Freedom Alliance (Forza Italia, Alleanza Nazionale, Lega Nord, and smaller centrist parties) won 372 seats in the Chamber of Deputies and 156 seats in the Senate. The Progressive Alliance won 207 seats in the Chamber of Deputies and 118 Senate seats. The center, represented by Mario Segni's Pact and the Partito Popolare Italiano (former Christian Democrats), trailed with 46 seats in the Chamber and 31 seats in the Senate. The following parties received more than four percent of the vote, qualifying them for proportional seats in the Chamber of Deputies: Forza Italia Leader: Silvio Berlusconi Seats: House 113, Senate 36. Partito Democratico della Sinistra (PDS) (Democratic Party of the Left) Secretary: Massimo D'Alema Seats: House 114, Senate 61 Alleanza Nazionale (AN/MSI) (National Alliance) Secretary: Gianfranco Fini Seats: House 109, Senate 48 Partitio Popolare Italiano (PPI) (Italian People's Party) Acting secretary: Rosa Russo Jervolino Seats: House 33, Senate 27 Lega Nord (Northern League) Secretary: Umberto Bossi Seats: House 117, Senate 60 Rifondazione Comunista (RC) (Communist Renewal) Secretary: Fausto Bertinotti Seats: House 39, Senate 18. Patto Segni (Segni Pact) Secretary: Mario Segni Seats: House 13, Senate 0 Political Environment for Agriculture The role played by the Ministry of Agriculture in the definition of agricultural policy has evolved over the last three decades under the influence of two important factors. First, there has been the progressive expansion of the Common Agricultural Policy (CAP) to cover all of the major commodities and farm sectors, a development that has brought considerable change to the formerly more autonomous powers and responsibilities of the Ministry of Agriculture in setting national policy. Second, within Italy there has been a devolution of primary responsibility for implementing farm policies to the twenty regional governments. As a result of these two developments, the Ministry of Agriculture now serves as a conduit for the policy directives and funds provided by the European Union and the local authorities at the regional level who implement the programs and spend the money. With the approval of a national referendum in April 1993, to eliminate the Ministry of Agriculture and delegate even more authority to the regional governments, there may be an increase in inconsistencies in farm policies and an expansion in agricultural expenditures on the regional level.