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Rocco Buttiglione puffs on his toscano cigar and recalls the first time he ever met Silvio Berlusconi. "It was in 1978," says the philosophy professor and leader of the center-right Christian Democratic Union. "He was just moving into the TV business and thought he had to learn more about Italian society and politics. So he asked me to give him some classes on democracy and government. His approach surprised me, but it is the very image of Berlusconi — he is a man capable of learning and eager to learn."

Since the billionaire business mogul first jumped into the political arena and won election as Prime Minister in 1994 he has learned a lot — mostly from his own mistakes. Berlusconi came to power as a political dilettante and stuffed his cabinet with largely inexperienced cronies. He challenged the country's powerful judges and soon found himself in the cross hairs of numerous investigations. After only seven lackluster months, Berlusconi's government toppled when a key ally pulled out of the center-right coalition.

That could have been the end of Berlusconi's foray into politics. Yet today the so-called Il Cavaliere, 64, is poised to win his old job back in the May 13 face-off against former Rome Mayor Francesco Rutelli, 46, photogenic head of the ruling center-left Olive Tree coalition. In policy terms, there are no major differences between the two sides. Both call for lower taxes, better services, stronger economic growth, continued privatization, reinforced anticrime measures and tougher policies on illegal immigration.

More than anything, the campaign is shaping up into a battle of personalities between Berlusconi, the self-made entrepreneur, and Rutelli, the younger, smoother political pro. Or as the Italians like to say, the Rich against the Beautiful. Though the gap is narrowing the latest polls show Berlusconi leading by four points. But with more than 20% of the electorate still undecided, Rutelli pins his hopes on pulling these swing voters to his side.

The center-left can point to some real accomplishments since economist Romano Prodi led them to victory in 1996 — not the least of which was to stay in power for a full parliamentary term, no mean feat in Italy. Prodi oversaw a heroic effort to bring down Italy's chronic deficits and qualify for entry into the E.U.'s single currency in 1998. More than $75 billion worth of state industries were privatized, inflation was slashed in half and the economy achieved healthy growth rates. But Italy still lags behind most of its European partners, with slower growth and higher unemployment than the E.U. average.

The government's most glaring failures came in the political arena. Born of the breakup of the old ruling class following the corruption probes of the early '90s, the Olive Tree was a heterogeneous collection of former Socialists, Christian Democrats and reformed ex-Communists, now known as the Left Democrats and headed by Massimo D'Alema. The coalition was held hostage by the tiny hard-line Communist Refoundation, whose votes it needed to stay in power. When Communist Refoundation withdrew its support in October 1998, D'Alema succeeded Prodi as Prime Minister only to pass the torch to Giuliano Amato, a centrist technocrat, following losses in last year's regional elections.

For a coalition that had promised a new kind of politics, the revolving-door turnover seemed all too familiar. "D'Alema made a fundamental mistake in eliminating Prodi as Prime Minister, because Prodi was the man with whom the center-left had gone to the polls," says Franco Pavoncello, professor of political science at Rome's John Cabot University. "His removal made the electorate lose their sense of contact with the government." D'Alema's other mistake was to resurrect Berlusconi by naming him to a government commission that was seeking to reform the electoral system and put an end to Italy's comic-opera political instability.

The aim was to replace proportional voting with a majority system that, it was hoped, would create a stable bipolar system. A partial reform in 1993 produced a hybrid arrangement, with three-quarters of the seats chosen by majority vote and the remainder proportionally. The result was to multiply the number of parties, currently more than two dozen, and make the system even more unwieldy. Last May, the government held a referendum to eliminate proportional voting entirely in national elections. But Berlusconi shrewdly turned it into a plebiscite against the government and called for abstention. His battle cry: "Stay at home and send them home." A majority of Italians heeded his advice.

Though the referendum was massively approved, it was ruled invalid because less than 50% of the electorate voted. Following strong center-right scores in the European elections of June 1999 and the regionals of April 2000, the failed referendum handed Berlusconi a third "victory" and made him the front runner for the Prime Minister's job. In what was widely seen as an act of desperation, last October the Olive Tree's chieftains decided to jettison the bland Amato, 62, in favor of the charismatic Rutelli as its standard bearer. "Strange way to choose a leader," says

Stefano Folli, political commentator for the Milan daily Corriere della Sera. "It was just an image operation, and the electorate perceives this. Rutelli is a good campaigner, but the people identify with Berlusconi as a man of success who can create wealth for everyone." Berlusconi's position as a self-made business tycoon is both his greatest strength and greatest weakness as a politician. Through his $12 billion Fininvest holding company, the former cruise-ship crooner now controls Italy's three main private TV networks, its biggest publishing house (Mondadori), a major newspaper (Il Giornale) and a leading soccer team (AC Milan). Forbes magazine ranks him as the world's 14th-richest person, with a fortune estimated at $12.8 billion.

This concentration of financial and media power makes for a potential conflict of interest when combined with the country's supreme political power. "Do you find it normal," Italian author Antonio Tabucchi wrote in France's daily Le Monde, "that in a Western parliamentary democracy, not some South American country, a man who owns newspapers, publishing houses and television stations can act in the public interest and become Prime Minister? Doesn't it seem to you that this sort of power heralds a new form of totalitarianism?"

Berlusconi rejects such talk as political hyperventilation. He notes that he resigned as ceo of Fininvest in 1994, though he remains its owner, and talks vaguely of putting his assets in a blind trust if elected. "My enemies tried to destroy my companies by using judicial, tax and political pressure against me," he told Time in a 1997 interview. "It's political extortion and blackmail. That's the real conflict of interest. They want to influence my political action by attacking my companies."

Indeed, Berlusconi and his companies have come under attack in a dozen or so judicial probes into bribery, corruption and tax evasion charges. But, so far, none of them has stuck: some charges have been dismissed; others have resulted in convictions that were overturned on appeal; still others were struck down by the statute of limitations. None of this has much impact on Italian public opinion. A recent Corriere della Sera poll showed that 39% of the public is indifferent to the conflict of interest issue, while 23% feel that Berlusconi's business interests would help him govern better.

Probably Berlusconi's most serious liability is his alliance with the Northern League's Umberto Bossi. A gravel-voiced, acid-tongued rabble-rouser who once called for the prosperous north to secede from the rest of the country, Bossi spouts an anti-immigrant, anti-E.U. line. He has ceased to call Berlusconi "Berluskaiser," but he recently branded Amato a "Nazi dwarf," and referred to the European Union as "the Soviet Union of the West." Though Bossi is the one who pulled the plug on Berlusconi's first government, Il Cavaliere claims to have won assurances that the League will remain loyal this time. But the prospect of Bossi's participation in government does not leave Italy's European partners overjoyed. Belgian Foreign Minister Louis Michel has even raised the prospect of Austria-style E.U. sanctions against Italy.

Such worries are heightened by the fact that Berlusconi's Freedom Alliance is allied in Sicily with Luigi Caruso, a candidate from the far-right Italian Social Movement, heirs to the Fascist Party. And though Berlusconi's other main coalition partner, Gianfranco Fini's National Alliance, has moderated its stance and moved to the center, its roots in the fascist movement are unsettling to many. Berlusconi's forces counter that the left's alliance with communist groupings is equally unsavory. As for Bossi, Berlusconi's aides say privately that they expect to win big enough to get along without the League's backing. But Bossi has already left a big imprint on the center-right platform, extracting promises to work for a devolution of administrative powers to the regions, and for tougher anticrime and anti-immigrant policies.

Immigration is a recent but rising concern in Italy, where foreign residents officially account for only 2% of the population. In the past few years though, Italy has become a key entry point for immigrants from Albania, Africa, Asia, Eastern Europe and Turkey. Polls show that Italians now consider immigration to be the country's third-biggest problem, after unemployment and crime. These facts have not been lost on Rutelli, some of whose posters promise crackdowns on "the illegal immigration racket."

The real centerpiece of Berlusconi's platform is a promise to streamline state bureaucracy and slash taxes. Berlusconi's plan would cut income taxes across the board by between $25 billion and $35 billion a year. Rutelli is promising to cut taxes by up to $23 billion a year, although he would target them to help the lower income brackets. The problem with both proposals is that the lost revenue will have to be offset by extensive spending cuts to stay within the budgetary requirements of all eurozone countries. That means reining in Italy's profligate pension system, which gobbles up 30% of state spending and groans under the weight of an aging population.

But neither side is saying anything very precise about reforming pensions or loosening up the rigid labor market, which contributes largely to the country's 9.9% unemployment rate. And for good reason: they well know that union opposition could trigger crippling strikes. And as Berlusconi recently admitted to the New York Times, talking about such things during the campaign "doesn't bring us votes."

Berlusconi's candor speaks volumes about his approach to politics. Apart from his general free-market philosophy, the details don't really matter. He seeks power, not for its own sake, but as a matter of personal vindication. "Berlusconi needs love, that's a key motivation," says Giuliano Ferrara, editor of the daily Il Foglio and a former adviser to Berlusconi.

Berlusconi's supporters admit that he stumbled on his first try at governing, but they insist that he has matured as a politician. "He was a dilettante when he entered politics," says Berlusconi ally Pierferdinando Casini, leader of the Christian Democratic Center, "but today he is a pro. He won't make the same mistakes. He has finally understood that running a country is different from running a big company." Buttiglione agrees. "At first," he says, "Berlusconi was impatient with the intricacies of public life. Now he has learned that you can't cut every knot with a sword."

Corriere della Sera's Folli sees Berlusconi, for all his megalomania, as a "key factor" in modernizing Italian politics. "He's the man who has done the most to change the system in the last decade," says Folli. Berlusconi, he adds, has "proved his qualities as a political leader by forging his coalition and leading it with a strong hand. Whether he has the qualities of a statesman remains to be seen." Unless Rutelli pulls off a stunning upset — and that is always a possibility in this volatile country — Berlusconi will soon have a chance to answer that question at the helm of Italy's 59th postwar government. The world will be watching.

• THOMAS SANCTON / Rome
• Italy's 'Il Cavaliere' has the money and the moxie, but is that enough to make him Prime Minister again?