Written by On the 2nd of June of 1946, following Mussolini’s fascist regime, Italy finally became a democracy. Since then, 67 governments and 30 Prime Ministers (PM) rose to power, some more than once, in only 75 years, hinting at the instability of Italian politics.
This past January, the country was confronted with yet another political hardship. Italia Viva’s leader Matteo Renzi disagreed with the government’s allocation of over 200 billion euros of EU funds, intended to tackle the country’s crises. Renzi wanted the funds to be spent in new infrastructure projects, while former PM Giuseppe Conte was planning on appointing a panel of experts to direct the allocation. In response, Renzi withdrew two ministers from Conte’s government, making him lose majority in Parliament. Unable to form a government, Conte resigned. Hence, President Sergio Mattarella decided to appoint a technocrat, Mario Draghi, to form government, as calling for early elections would not be advised during a pandemic.
What awaits Mario Draghi?
I. CORONAVIRUS
Draghi is confronted with an Italy in deep economic recession amidst a global pandemic. The country was the first in Europe to impose a nation-wide lockdown last March and during the second surge, in the Fall, Italy reached almost 100 thousand virus-related deaths. Falling behind its vaccination program, blaming delivery delays, and having a national pandemic plan that has not been updated since 2006, Italy urgently needs a structural reform.
Draghi’s main objective is to accelerate the national vaccination program. He stated that his «main duty […] is to fight the pandemic with all means and safeguard the lives of our fellow citizens». For this purpose, he intends to mobilize the armed forces, civilian volunteers, and civil protection units. As such, the civil protection agency’s chief and Italy’s COVID-19 commissioner were already fired. The latter was substituted by an army logistics expert. Additionally, the PM hopes to enact reforms on the health sector such as strengthening local hospitals and community health services.
II. ECONOMY
Italy is living its worst recession since World War II, with –10,6% real GDP growth rate in 2020, one of the lowest in the euro zone. The unemployment rate is around 9,84% and expected to rise after a possible lift in employment dismissals ban. Although it has been decreasing recently, youth unemployment marginally increased to 30,9% in 2020. Several EU Member States worry about the country’s public debt, 4th largest in the world, estimated to rise to almost 160% of 2021’s GDP. Italy’s economic issues are structural: real GDP per capita has barely grown in the last two decades; the labor force shows low productivity and fails to integrate young workers; the business environment is unattractive and uncompetitive, owing to the red tape, legal and tax systems affecting corporations.
The root of Italy’s most recent political crisis, the allocation of 200 billion euros in EU funds will be Draghi’s challenge. The EU program, NextGenerationEU, is heavily directed towards the digitalization of the economy, the ecological transition, R&D, and healthcare. The PM stated he would follow the previous government’s proposal, assuring that it would be strengthened with more details «in the coming weeks».
Mario Draghi has major economics functions in his curriculum. A graduate from “La Sapienza” University in Rome, he received his PhD from MIT, where he was mentored by renowned economists such as Solow and Modigliani. He was Director General of the Italian Treasury and, in 2006, became Governor of the Bank of Italy, until being nominated President of the European Central Bank (ECB), in 2011.
Draghi’s background led him to the forefront of European monetary policy regulation until 2019, carrying the weight of the 2008 financial crisis and following sovereign debt crisis. On the 26th of July 2012, as ECB President, Draghi proclaimed three words that defined the turning point in the crisis, reclaiming investors’ trust: “Whatever it takes”, implying that the Euro would sustain any backlash regardless the cost. Now, he assumes responsibility over a highly fragile Italian economy.
POLITICS
I. Asking a technocrat for help… for the fourth time
Draghi is the fourth technocrat in three decades invited to lead. In Italy, citizens elect Parliament representatives, body composed by the Chamber of Deputies and the Senate. The creation of a government occurs when the new chambers take office and elect their Presidents. It is albeit often difficult to form a government because parties do not always obtain a majority, obliging the leading forces to negotiate. These resulting coalitions have often been ephemeral. It is in times of crisis and when elections are too risky, such as in January, that Italy’s President may appoint an expert.
Although many share Renzi’s belief that “[Draghi] saved Europe, he will save Italy”, past experiences with technocrats have not always been positive. The first was formal central banker Azeglio Ciampi (1993-1994) amidst a recession and following a large political corruption scandal. Shortly after was the International Monetary Fund’s executive director, Lamberto Dini (1995-1996). Finally, in 2011 and due to political failures, former European commissioner Mario Monti was appointed. His policies included pension reforms and strong austerity measures, which did not resonate with the electorate. Although the economy did somewhat improve, his elections campaign was not good enough to save him and his coalition, coming in fourth place in the following elections.
Almost all major figures and parties support Draghi’s government, which includes both experts and professional politicians. Overall, many consider resorting to technocratic governments temporary solutions which forget underlying problems such as corruption, leading to constant political instability. Additionally, some consider such governments to be anti-democratic, as they include figures which have not been chosen through representative democracy. According to an EU survey in 2019, 82% of Italians claim they “tend not to trust” their politicians, a sentiment which has materialized into increased support for the anti-establishment 5-star movement.
II. More than a technocrat
Mario Draghi is not any technocrat. Having been ECB’s President, he is known for his negotiation and rhetoric skills. His appointment comes at a time when Europe is facing difficult administrative challenges. According to The Economist’s Ben Hall, he «gives the French leader a partner in Rome who is a powerful and credible advocate of closer European integration just at the time when Germany prepares for a change in leadership».
Draghi’s global respect is one of the main differences from his technocratic predecessors. Being largely credited for saving Europe during the sovereign debt crisis, not only does he intend to save Italy from this crisis, but to introduce structural and social measures.
III. Bigger dreams
In fact, the new PM’s aspirations for Italy are not limited to solving the economic and health crises. He plans on instating several structural reforms, for instance in the legal system, education, and public administration, as well as adjusting Italy’s tax system. While addressing Italy’s Senate, he stressed the importance of closing salary gaps and strengthening the welfare system, with the intent increasing the number of women in the labor force. Lastly, he paid special attention to Italy’s younger generation, stating that a vast number of talented people led the country to seek more prosperous futures over the last 20 years, which can be achieved by improving training and career prospects nationally.
With an existing history of technocratic governments failing to resolve important structural issues, some might feel skeptical regarding Draghi’s success probabilities, defending that a career politician might be more suited for the position of PM. Nevertheless, his career path has demonstrated strong political, negotiation, and rhetorical skills, bringing hope to a country in need of deep reform in many fronts. Will Mario Draghi’s appointment bring real change, or is history just repeating itself?
Sources
AP News, Barrons, Bloomberg, CNBC, DW, Economist, Euractiv, European Central Bank, European Comission, Eurotopics, Expresso, Financial Times, Guardian, Jacobin, NBC News, Político Europe, Reuters, SIC Notícias, Statista, The Local, U.S. News
Ana Terenas
Maria Mendes
Hugo Canau
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