Bologna, Italy — In the sumptuous, salmon-colored 18th-century palazzi dominating downtown Bologna, Armani and Valentino designer outfits fill the windows, until the visitor reaches Via Barberia 4 - the most baroque, and most opulent palace of all. Above its front door hangs a plaque with a red sickle and hammer, and the sign, ``Headquarters of the Italian Communist Party for Bologna.'' Here is Italian politics' greatest paradox. As the country's capitalist economy and democratic political system prospered, so have its Communists. Bologna best illustrates this perplexing phenomenon. For the last 40 years, Communists have dominated local politics, turning one of the country's richest cities into one of its reddest.
After all these years of success, Bologna's Communists finally are beginning to struggle with the contradictions of preaching communism to confirmed capitalists. Traditionally, the party held full power in City Hall. But late last year, it was forced to accept a coalition with four other parties.
``We have the same difficulties as do the rest of European and American left,'' said Bologna Mayor Renzo Imbeni, a ranking party member, in an interview. ``In this era of Reagan and Thatcher, we haven't come up with convicing answers.''
This identity crisis holds important implications for the future of Western Europe communism. Elsewhere on the free part of the continent, communist parties are shriveling into marginal organizations, battered by the transformation of their working-class electorates into middle-class homeowners and by the disillusionment of their intellectual supporters with Marxism and the Soviet Union. Only in Italy have the Communists been able to retain wide power, continuing to win more than 30 percent of the vote, ranking as the country's No. 2 political force.
``The Italian Communist Party is unlike any other Communist Party, anywhere,'' declared Mayor Imbeni. ``When we think of socialism, we don't think of the Soviet Union, China, of Yugoslavia, of Cuba, or of any other orthodoxy. We think of Italy.''
His assertion underlines the reasons for the party's strength. After World War II, the Communists benefited from their leadership in the struggle against Benito Mussolini's Fascism and from the fractious divisons within the competing Socialist Party and became the dominant party of the Italian left. In Bologna, with its republican, anticlerical tradition, this meant being ``the'' dominant party.
Over the following decades, the Italian Communists consolidated their power by adapting better than other European Communists to the intellectual currents of the Western world. After the 1968 invasion of Czechoslovakia, they began moving away from the Soviet Union. In 1980, they broke almost all ties with Moscow following the suppression of Poland's independent trade union, Solidarity. At the same time, the Communists supported Italy's democratic system, standing strong against terrorism during the 1970s. They even accepted continued Italian membership in NATO.
In Bologna, party members proved to be capable and open-minded administrators. Communist agricultural cooperatives helped turn the surrounding countryside into Italy's breadbasket - and the city into the uncontested capital of Italian gastronomy. Labor peace helped create a much-admired center of industrial dynamism, with small- and medium-sized firms producing high-quality clothes and high-technology machines. And the Communists have provided widely admired city services: buses that run on time and spotless nursery schools.
``Our Communists are really Social Democrats,'' says Augusto Balloni, president of the University of Bologna's political science faculty. ``They are rich and fat. They don't talk of revolution anymore. They talk of having nice houses, American-style television, and long vacations.''
This very prosperity now confronts the party with a serious identity crisis.
``The Communists are a little democratic and a little authoritarian,'' says Lorenzo Frassoldati, political editor at the local Il Resto del Carlino newspaper. ``They say they are like all other parties and then they say they are different.''
This ideological confusion plants doubts in voters' minds. While willing to have their city run by the party, the Bolognese never have been as sure that they want Communists in power in Rome. In national elections, Communist vote totals fall several percentage points below their local scores (in 1985, for example, the Communists received 44 percent of the vote in Bologna, compared with 30 percent in Italy as a whole), leading Mr. Frassoldati to conclude, ``in the last analysis, people here don't trust the Communists.''
Changing social and economic currents add to these doubts. In an era of tax revolt, voters no longer are content with more municipal services, especially when some programs have turned out to be expensive dinosaurs.
Thanks to these trends a new political landscape is emerging. Long fractured by internal party disputes, the Socialists have unified behind 30-year-old local party leader Enrico Boselli who, under the recent coalition agreement, became vice-mayor. From his office in Town Hall, the youthful Boselli preaches no-nonsense pragmatism, basking in the success of Socialist Prime Minister Bettino Craxi's nearly four years in power.
``While we Socialists are modernizing,'' Mr. Boselli says, ``the Communists are becoming isolated.''
Even the long-dormant local Christian Democrat Party is on the offensive. From his cramped office in the back halls of the town hall, party leader Paolo Giuliani charts out ambitious plans to recapture power for his conservative party. He says, and independent observers agree, that the Roman Catholic Church is experiencing a revival in Bologna. Concern is growing for ``moral'' issues such as abortion and drug abuse - traditional rallying cries for the Christian Democrats.
``When the next election is held in 1990, we believe the Communists finally will be forced to give up the mayorship,'' Giuliani says. ``We could join a coalition headed by a Socialist mayor.''
This may just be wishful thinking. The Communists remain established, holding powerful levers of patronage through their control of agricultural cooperatives and the labor unions.
``We're talking about a long transition period,'' Giuliani says. ``The Communists aren't going to disappear around here.''