Berlusconi Shares Investor Pain With $2 Billion Loss

By Andrew Davis and Lorenzo Totaro

Oct. 14 (Bloomberg) -- Prime Minister Silvio Berlusconi promises Italians they won't lose ``even a euro'' of their bank accounts in the current credit crisis. By contrast, the world's richest government leader according to Forbes has already shed about 1.7 billion euros ($2.3 billion) of his personal fortune.

Berlusconi, 72, had a net worth of $9.4 billion, according to Forbes' 2008 list of the world's billionaires. Almost a quarter of that had disappeared through yesterday as his media and banking shares plummeted with the 38 percent slide in Italy's benchmark stock index this year. The prime minister last week urged Italians not to dump stocks.

``Don't sell your shares, collect your dividends and in 18 to 24 months, the prices will be more realistic,'' he said at a press conference on Oct. 9.

Before entering politics in 1993, Berlusconi, a former cruise ship singer and door-to-door salesman, amassed a fortune by stringing together a network of local television broadcasters into what became Mediaset SpA, Italy's largest media company. Through his Fininvest SpA holding company he has branched out into banking and publishing. He also owns AC Milan, one of the country's most successful soccer teams.

Tooth Fairy

Berlusconi tried to single-handedly stop the bleeding on Oct. 10 when he said at a Naples press conference that world leaders were considering shutting global stock markets to give them time to revamp the rules of international finance. Less than an hour later and after the White House issued a statement denying such a plan, he retracted his remarks, saying it was just something he heard on the radio.



``Closing the markets would make it a whole lot worse,'' said Jim Rogers, Chairman of Rogers Holdings, in an interview with Bloomberg Television on Oct. 10. ``That is insane. I'm sure they'd call in the tooth fairy as well.''

Italy's stock market has been one of the hardest hit in Europe by the panick selling provoked by the credit crisis that has left banks unwilling to lend and companies starved for cash. The 38 percent decline in the benchmark S&P/MIB index this year is the biggest of Europe's five-largest stock markets and tops the 29 percent slide in the Dow Jones Industrial Average.

Mediaset Slide

At the time of the Forbes ranking in March, more than two thirds of Berlusconi's fortune was based on stakes he held in traded companies. Now the bulk of his losses stem from the 34 percent drop in Mediaset in the past five months through yesterday, which cut the value of his 40 percent stake to 2 billion euros from 2.93 billion euros on May 12.

He has also lost 168 million euros on his 35 percent stake in Mediolanum SpA, Italy's biggest Internet bank and 447 million euros from the decline in Mondadori Editore SpA, publisher of Panorama, one of Italy's best read weekly magazines in the same period. The 33 percent drop in Mediobanca SpA, Italy's biggest investment bank, cost him another 74 million euros.

Even if the crisis subsides, Italian markets may be slow to recover as slumping economic growth and rising unemployment fuel consumer and business confidence. Italy's economy contracted 0.3 percent in the second quarter and likely slipped into the third recession in five years in the third quarter, according to Confindustria, the Italian employers' association.

The economy may contract this year, Confindustria forecasts, underperforming the euro-region average for a 13th year. Unemployment rose to a two-year high of 6.7 percent in the second quarter, contributing to consumer confidence tumbling to a 15-year low in July.

Tax Returns

Still, Berlusconi won't have to rely just on the paycheck from his day job. He earned more than 139 million euros in 2006, according to his most recent tax returns released by parliament, mostly from the dividends on his equity stakes.

That compared with 235,000 euros for U.K. Prime Minister Gordon Brown and 240,000 euros for French Prime Minister Nicolas Sarkozy, with German Chancellor Angela Merkel earning 240,000 euros, according to Forbes.

Berlusconi's government service has hurt his standing among the world's richest people. He ranked 90th among the world's billionaires in Forbes magazine's latest list published in March, down from 77 last year. That still makes him the richest elected head of government, though some others, such as Russian Prime Minister Vladimir Putin, whose wealth is unknown, could rival Berlusconi.

Still it could have been worse. He recovered more than 300 million euros on his holdings in yesterday's 11 percent rally and today's advance in Italy's benchmark S&P/MIB index.

To contact the reporters on this story: Andrew Davis in Rome at abdavis@bloomberg.netLorenzo Totaro at in London or ltotaro@bloomberg.net