By Eric J. Lyman
ROME, Feb. 6 (Xinhua) -- Former Prime Minister Silvio Berlusconi's electrical inroads are dramatically increasing the possibility that he could become Italy's prime minister for a fourth time, while his populist platform is beginning to spook investors worried that Italy could return to its perch as one of the European Union's most troubled economies.
Berlusconi, a billionaire media kingpin, stepped down from his last term as prime minister in November 2011 amid fears Italy could be forced to default on its debt, prompting an economic collapse and even raising the possibility of a humiliating exit from the eurozone. Mario Monti, a former European commissioner and economist, replaced Berlusconi as the head of a technocrat government.
Monti went to work right away, slashing government spending, increasing taxes in some key areas, reducing tax evasion, and laboring to improve the country's image abroad.
The efforts have had some success, with yields on Italian bonds -- seen as an important barometer of the country's economic health, as a reflection investors' perception of the country's riskiness -- falling dramatically, and stocks prices stabilizing and eventually inching higher.
But Monti's austerity efforts have hurt every day Italians, reducing government spending, increasing their tax payments, and most likely acting as a drag on economic growth. That's a vein Berlusconi has tapped into, with a media blitz --centered on the three national television networks he controls -- and a stream of populist promises that experts say resonate with an increasing number of Italians.
The latest promise was well received by struggling Italian families, but increased election jitters among investors: Berlusconi, who has said he could work as finance minister rather than prime minister if his coalition wins, promised not only to repeal an unpopular property tax Monti put into place, but also to refund property tax payments made in 2012, something which would cost the cash-strapped government at least 4 billion euros (about 5.4 billion U.S. dollars).
According to Renato Brunetta, a former minister and a key Berlusconi advisor, refunding the property tax would immediately boost economic growth by increasing consumption from families currently watching their purse strings.
He said the refund would have an overall economic impact of 8 billion euros. Berlusconi himself said that the impact of the tax on Italy's real estate market has cost 360,000 people their jobs.
"Refunding (the tax) would add half a point to our gross domestic product growth rate," Brunetta said.
But opponents see it differently: Monti called Berlusconi's plans "a poison pill," and said it was tantamount to "buying Italians' votes with their own money."
Rosy Bindi, meanwhile, president of the center-left party of Pier Luigi Bersani, the only candidate still polling head of the surging Berlusconi campaign less than three weeks ahead of the Feb. 24-25 vote, called Berlusconi's plans "dangerous electoral propaganda."
Investors and economic analysts agree: Italian bond yields have started to rise in step with Berlusconi's climb in the polls, with the benchmark 10-year bond trading on secondary markets Wednesday at 4.50 percent, still well below the more than the unsustainable 7-percent level when Monti first took over, but markedly higher than the recent low of 4.11 percent from Jan. 25.
More troublingly, the spread -- the difference in yields between Italian bonds and those of a more stable economy, like Germany -- has grown dramatically over the last two weeks, something Monti blames on Berlusconi's surge.
"Monti's austerity reforms have been painful, but there is a real fear that a Berlusconi return could undo all of the painful progress of the last 12 or 14 months," said Oliver Rosetti from ABS Securities in Milan.
According to the latest polls from polling firm Opinioni, Bersani continues to lead the pack with support of 34 percent of likely voters, followed by just under 30 percent for Berlusconi. Monti and comedian-turned-activist Beppe Grillo, are in a virtual tie with around 14 percent support each.