Shares of Prime Minister's TV network Mediaset rise -- then fall -- after surviving no-confidence in Parliament. Though Berlusconi still denies politics and business are linked, the markets disagree.
By Francesco Spini
MILAN – Earlier in the week, as Italian Premier Silvio Berlusconi faced a pair of crucial confidence votes, and riots broke out in the streets of Rome, the Milan stock market was watching.
The shares of Berlusconi's Mediaset broadcasting company had been slipping since November as the Italian leader faced a challenge from a group of rebel lawmakers that risked bringing down his government.
But after Berlusconi won the two votes on Tuesday, things quickly changed. Mediaset started bouncing back. The company's shares shot up 4 % on the Milan stock exchange in the immediate aftermath of his Parliamentary victory. They slowed down a little in subsequent hours, but closed up 3.29 %, at 4.63 euros. It was Mediaset's best result in three weeks.
Mediaset was one of the few stocks to do well on Tuesday. Another was ENI, the Italian energy giant that was recently cited in Wikileaks cables about the unusually close relations between Berlusconi and Russian Prime Minister Vladimir Putin, and energy deals between their respective countries.
For Mediaset, the run didn't last, with its shares closing down 1.29 % Wednesday, and continued to struggle through the week, as it became clear that Berlusconi's hold on power remains shaky at best.
But this is clearly how the market sees it, and has always seen it: Berlusconi means Mediaset. Traders continue to take into account the Berlusconi (the politician) Factor in the company technically run by his children and closest friends.
A portion of the value that is currently attached to Mediaset shares is embedded in the fact that Berlusconi is the prime minister. The market believes that when Berlusconi is sitting in the prime minister's palace, Palazzo Chigi, Mediaset is a little bit there with him, too.
It clearly doesn't matter how often Berlusconi repeats he has had nothing to do with Mediaset. "I don't even call the switchboard, lest somebody said the prime minister called…" Berlusconi once declared.
The market is convinced otherwise. And, according to Wikileaks cables, so are U.S. diplomats. In recent cables released by Wikileaks, the U.S. ambassador to Rome David Thorne suggests that a recent Italian communications decree may have been drafted to help Mediaset in its battle against Sky Italia, a subsidiary of Rupert Murdoch's News Corp.
Berlusconi has also come under criticism because earlier this year he appointed a longtime friend and TV executive, Paolo Romani, at the helm of the Ministry for Economic Development, which also deals with media and communications issues.
Under the center-left government headed by Premier Romano Prodi, Berlusconi's predecessor, Mediaset underperformed the market by some 30 percent. But Berlusconi is not like Prodi. Berlusconi is like a cat: and his survival in the recent confidence votes gives him yet another one of his nine lives.