Mario Draghi is a blessing for Italy. But he doesn’t have enough time

“I have no particular ambitions. I’m just a man, a ‘nonno’ at the service of the institutions,” Mario Draghi said last December. That was when Italy was about to elect a new president. Observers took Draghi’s statements as an expression of his interest in the highest state office.

As a “Nonno”, the 74-year-old Draghi would certainly have made “bella figura” in the Quirinal Palace, the seat of the head of state, and deservedly joined the long line of exceptionally capable, older gentlemen who traditionally hold the highest office in Italy.

But Draghi’s somewhat clandestine candidacy was lost in the noise of the Roman party dispute, after all the other grandfather of the republic, Sergio Mattarella, was forced into a second term against his will, and Mario Draghi stayed where Mattarella had sent him months earlier: in the Palazzo Chigi , the seat of the Prime Minister. As a “technician” he was supposed to continue working on those dossiers that his predecessors had failed to do.

That, too, has a tradition in Italy: when the political class fails, non-politicians are brought in. Carlo Azeglio Ciampi belonged in this category, but so did Lamberto Dini and Mario Monti, independent experts who were supposed to pull the country out of the swamp. And now again Mario Draghi, an economist and central banker trained at the Sapienza in Rome and at MIT in Boston, the man whose three famous words “Whatever it takes” did much to calm the financial markets during the euro crisis in 2012.

Dream Team Mattarella – Draghi

Mattarella on the bridge, Draghi in the engine room – that seemed like the best of all constellations, a dream team for a country that had been hit particularly hard by the pandemic and whose economic situation within the EU was of great concern. Europe breathed a sigh of relief.

And Draghi continued what he started in 2021 after the turmoil of the presidential election. He pressed on the pace of the reforms, which were and are urgently needed and are the prerequisite for Italy actually receiving the reconstruction aid promised by the EU in the amount of over 200 billion euros.

Watching Draghi govern is a pleasure. Finally an Italian head of government who puts substance before staging, who knows what he wants, follows a precise plan, exudes reliability and has brought Italy back onto the European stage. A pleasant professionalism has supplanted the otherwise rampant loquacity of Italian politics. In short: Draghi is an exception in Italy, but also in Europe.

Are correspondingly high (and stable). his poll numbers. There is criticism of him, of course, but it is not fundamental and primarily relates to his somewhat cool nature and the fact that, as a former central banker, he seems to be far removed from the concerns and needs of the little people.

Two halves

Draghi’s time as Prime Minister is divided into two halves of almost exactly one year each. The first half began with his inauguration in February 2021 and ended with the outbreak of the Ukraine war, the second is currently underway and will last until spring 2023, when the current legislative period ends and a new parliament has to be elected. Draghi has ruled out that he will then be available again. At most, it is speculated in Rome, he will move up to the office of President if Mattarella resigns early.

In his first half, the former head of the ECB seemed to be doing almost everything: with a solid majority behind him and the promised billions from the EU, Mario Draghi tackled the country’s number one weakness: Italy’s chronically low economic growth. It makes it impossible for the country to reduce the country’s huge national debt, it restricts the scope for social policy measures, and it hinders the increase in productivity. Draghi subordinated everything to this goal – growth.

2021, an Italian year

With success: in 2021 Italy achieved economic growth of 6.6 percent – admittedly from a low starting point, but higher than expected. At the same time, his government initiated important reforms, above all in the judiciary, whose procedures take an agonizingly long time and create legal uncertainty for individuals and companies, but also in the complicated tax system and in the state administration with its Byzantine processes.

A government that is working well and delivering results, plus the European football title, the Eurovision Song Contest win, the Olympic 100-meter sprint title and the Nobel Prize in Physics – 2021 has become a symbol of sudden happiness for Italy after the trauma of the pandemic the images of nocturnal corpse transports in Bergamo.

Confidence lasted precisely until February 24, 2022, when Vladimir Putin launched the invasion of Ukraine. With the outbreak of war and rising inflation, prospects quickly clouded over. Inflation has now reached almost 7 percent, and the increase in energy prices is slowing down companies and private individuals across the board. The Italian economy is still growing, but only weakly.

It is now governing in a state of emergency. But even in this respect, Draghi rarely make mistakes. He recognized the need to look for alternative sources of energy more quickly than large sections of European management personnel. His government found what it was looking for in Algeria, Azerbaijan and other countries with which it has signed important agreements that ensure that Italy can free itself relatively quickly from its one-sided dependence on Russia. For once, the geography is helpful: As a Mediterranean country, Italy is conveniently located, and pipelines run through the country from all directions.

At the same time, Draghi, who has an excellent network from his time at the World Bank in Washington, easily pronounces his commitment to cooperation with the USA and NATO and to supplying arms to Ukraine. This gives him room for maneuver and gives Italy new weight and respectability on the geopolitical level.

In terms of domestic and economic policy, however, time is running out. The second half is now well advanced, and as the distance to the 2023 election date decreases, his coalition partners are making life difficult for him.

What next without Draghi?

After all, the reform train is jerking and jerking, but it’s still going. A few days ago, Draghi managed to persuade his partners to take further reform steps. The highly controversial, symbolically important liberalization of beach concessions and the reform of the treasury, which among other things is intended to reduce the tax burden and curb tax evasion, are now making progress after weeks of being pushed back and forth between the parliamentary commissions. The government is still moving within the budget framework. Socio-political cushioning measures are quickly financed by a so-called “windfall tax”, a special tax for energy companies that are currently making high profits due to price increases.

But the distrust in the markets has not disappeared. The big question Italy is currently dealing with is whether the reforms will be sustainable. How much more can Draghi land before he retires to his country estate in Umbria next year? What remains of what he accomplished in his two halves as Prime Minister? Are his reforms irreversible?

Observers agree: Mario Draghi’s stay at Palazzo Chigi is too short to solve Italy’s major problems. Two years is not enough to reduce the mountain of debt, ensure that wages that have stagnated for years increase again, combat undeclared work, tackle the aging of society or reduce the gap between North and South.

Many of these structural questions have deeper socio-cultural roots that overwhelm even Mario Draghi. The aversion of Italians to liberalization, the vested rights of permanent employees to those with precarious temporary contracts, the irrational fear of competition, which is urgently needed to bring more young people into the work process – all this is a task for generations to tackle.

In the hands of the EU

Nevertheless: Italy is stronger than it often appears. The country has active and innovative entrepreneurship, it has been generating export surpluses for years, and well-known brands characterize its economy. Experts also consider a debt crisis to be unlikely, at least in the medium term, even given rising interest rates. In short: Italy’s resilience should not be underestimated.

Above all, and this is politically not without controversy, Italy can rely on Europe. In the last few years – pushed by the Draghi government – ​​Rome has largely placed itself in the hands of the EU in terms of economic policy. The most important growth impulses come from the reconstruction program of the Brussels Union. In addition, Italy is still benefiting from the extensive debt purchase program of the European Central Bank. At the same time, however, there is pressure from Europe to reform, which a future government without Mario Draghi cannot completely ignore if it does not want to waste the billions that the EU has promised.

So it doesn’t necessarily have to be a relapse into dark times when Italy one day has to do without the “Nonno” in the engine room. But Draghi’s reforms are by no means consolidated. Because the political crisis continues: Italy must finally become more predictable and stable politically. Otherwise the call for the next “technician” will soon be heard.