A New Chapter in Italy

A New Chapter in Italy

Draghi’s Chance to Relaunch the Crisis-Hit Country

03/2021  | Reading time: 9 minutes

After Matteo Renzi’s Italia Viva triggered a political crisis by withdrawing its support for Giuseppe Conte’s government in January, Italy could not afford a months-long electoral campaign during a most crucial moment in the fight against the pandemic. After the political parties proved unable to come up with a plan for a new coalition, President Sergio Mattarella called on Mario Draghi to form a government of national unity and tackle the health and economic consequences of the pandemic. This is a historic opportunity for the newly appointed government to rebuild Italy—but not an easy one.

Italy’s previous prime minister, Giuseppe Conte, resigned on 26 January after disagreements over the plans on spending the EU’s recovery funds had plunged the country into political chaos and uncertainty amid the pandemic. Due to Italy’s fragmented political landscape and its heterogeneous and unstable coalition governments, the country has experienced various government crises during its history. The recent crisis, however, had a “high-risk factor,” as Italy must in the upcoming period work out a proper plan on how to allocate an over EUR 200 billion fund from the EU’s Recovery and Resilience Facility. It is worth noting that Italy receives the largest amount as a mixture of loans and grants among all the member states. At the same time, the government has a crucial responsibility to manage the country’s vaccination programme, replete with several challenges and uncertainties, as vaccine roll-out is going slower than expected in the EU. As of 4 March, the pandemic has 98,974 victims in Italy according to the data published by the Civil Protection Department of the Presidency of the Council of Ministers (Dipartimento della Protezione Civile—Presidenza del Consiglio dei Ministri), and the number of active cases amounted to 446,439.

The 73-year-old Mario Draghi, nicknamed “Super Mario,″ is an economist and the former head of the European Central Bank (ECB) and described by his colleagues and friends as a serious and trustworthy expert. He is not only a competent and credible technocrat with an excellent reputation in Italy and abroad alike, but, as the ECB’s president, he also played a crucial role in saving Europe’s single currency, the euro, during the European debt crisis. He will lead a government of national unity deploying political parties and technocrats and has had solid support so far. Nevertheless, it is unclear whether this unnatural formation will be sustainable in the long run, as previous “forced-marriage″ experiments of a similar nature, e.g., the League–Five Star Movement cabinet under the leadership of Conte, or the Democratic Party–Five Star Movement government known as “Conte bis,″ failed after a relatively short period. Now, the current coalition comprises all of the biggest Italian political forces: the far-right League (Lega), the formerly anti-establishment Five Star Movement (Movimento Cinque Stelle, M5S), and the centre-left Democratic Party (Partito Democratico, PD) along with smaller parties such as Berlusconi’s centre-right Forza Italia (FI), the centre-left-wing Free and Equal party (Liberi e Uguali), and Renzi’s centrist Italia Viva (Italy Alive) group.

One of the greatest parties of the coalition, the M5S, is today suffering from a serious identity crisis. The movement was founded in 2009 as an anti-establishment formation and a channel for protest against the perceived corruption and cronyism of the political and business elite in Italy. Despite its founding principle of never forming a coalition with the traditional parties, the movement teamed up with them two times in the last three years: first with the Far-Right and then with the Centre-Left. And, now, some of its members intend to govern with both of these forces at once. This has raised several concerns over the party’s future political perspective and credibility. Its inner divisions have become perfectly evident now, as some of its members refused to back Draghi after they had agreed to officially support him, a decision which led to their expulsion from the movement. This message can be interpreted as a clear sign of fragmentation and internal crisis within the M5S.

Contrariwise, the recent political crisis has created a golden opportunity for the League and the FI to be part of a government that will have a crucial role in managing the EU’s recovery funds amidst the pandemic. While Salvini practically pulled the League out of the government after a strategic miscalculation in 2019—he quit the coalition, expecting to trigger a national election, which would have strengthened his power—he could now grab a share of the pie following an unforeseen political situation initiated by Renzi.

The Draghi cabinet after the swearing-in ceremony at the Quirinale Presidential Palace
Source: Wikimedia Commons (Presidenza della Repubblica), licenc

One might wonder whether Salvini’s recent strategic attempt—to shift its party away from the Eurosceptic camp towards a more moderate centre-right direction and to shake off the far-right label—will be successful and, especially, how it will impact his party’s and his own popularity in the middle and long run. Salvini’s calculated move aims at boosting the politician’s image and his group’s approval rating, as polls show that the latter has been on the decline. According to the pollster SWG, the League’s decision to support the new government immediately resulted in a 0.7% increase in its support—which, thus, reached 24%—at the beginning of February.

Salvini explained his decision to join Draghi’s government as a clear message that the League is a fully mature and responsible party which does not put its interests before the country’s and its citizens’. However, when it comes to the practical side of this new experiment, it is hard to imagine how the previously hard-line, anti-immigrant, and Eurosceptic party will collaborate with the PD, which has a significantly different standpoint on several issues. Furthermore, the recent shift could easily generate a credibility concern among the party’s voters—and, as a consequence, have a negative impact on its general approval rate, contrary to what was expected—because of the departure from the League’s earlier political principles and ideas. It is also important to remember that a large part of the party’s support in recent years has been gained through its hard-line stance on certain issues, for instance, immigration. This is one of those areas where the government could face significant political battles and divisions in the upcoming months. Draghi would support a solidarity-based approach and a compulsory mechanism for the redistribution of immigrants, which stands in contrast to the League’s previous “closed-ports” approach.

Contrary to Salvini, Giorgia Meloni, the leader of the centre-right Brothers of Italy (Fratelli d’Italia, FdI) has refused to collaborate with the new coalition, expressing concerns about the future sustainability of Draghi’s administration. She highlighted that the current, extremely heterogeneous formation would not be able to remain coherent nor provide a clear vision for the country’s most important questions. She also made it clear that, according to her, the government would be in the hands of the centre-left and was based on an enormous compromise, similarly to previously failed political formations. The FdI would prefer early parliamentary elections—just like Matteo Salvini before he confirmed his party’s support to Draghi—as it would most likely lead to the victory of a right-wing coalition comprising the League, the FI, and the FdI. However, as it has been underlined before, Sergio Mattarella could not risk a long-lasting political dysfunction preceding the formation of a potential new government.

Data suggest that the country’s economy got hit severely by the pandemic last year. In the first quarter of 2020, the Italian economy shrunk by 5.4%, and by 12.4% in the second quarter. In April 2020, arrivals at tourist accommodations were down 99% compared to the same period last year, while car sales contracted by 98%, retail sales by 29%, industrial production by 47%, and construction production by 68%. Obviously, Italy—which is one of the eurozone’s mightiest economies, being third only to Germany and France—needs holistic, coherent, and sustainable responses and a competent leader in the current economic and health situation. Draghi is such a competent leader, and this makes him well liked by the Italians with a more than 71% approval rating.

In his first speech, Draghi pointed out that his government would accelerate the country’s vaccination programme, and outlined plans for investing the EUR 210 billion from the so-called Next Generation EU recovery programme and for structural reforms in Italy’s legal system and public administration. Concerning the distribution of the funds, the administration aims at strengthening the strategic dimension of the programme in the upcoming weeks—following the plan by the previous government, strong emphasis will be put on implementing reforms in digitalisation, innovation, competitiveness and culture; green revolution and ecological transition, infrastructures for sustainable mobility; education and research; inclusion and cohesion; and healthcare.

The new coalition’s foreign policy approach is expected to be strongly pro-European and Atlanticist, in line with Italy’s historical anchors. The new prime minister highlighted that his government would work towards strengthening European integration while the country’s traditional regions of interest—like the Balkans and the wider Mediterranean region—would also remain important foreign policy priorities. At the same time, Draghi’s government will place emphasis on strengthening the partnership with France and Germany, on the one hand, and the states of the southern shore, e.g., Spain, Malta, Greece, and Cyprus, on the other. There will be a place for dialogue with Russia, China, and Turkey, but not without forgetting human rights concerns.

Draghi’s technical–political government first won a confidence vote with 262 yes and 40 no votes and 2 abstentions in the Senate on 17 March, and, then, with 535 yes and 56 no votes and 5 abstentions in the Chamber of Deputies on 18 March. Draghi put technical experts in key roles, most importantly in those responsible for ensuring that the recovery fund will be used according to EU criteria. For the prestigious role of minister of economy and finance, Draghi will rely on a non-political figure, Daniele Franco, who served as director general of the Bank of Italy (Banca d’Italia) until 12 February. The current administration has a historic opportunity to alleviate the enormous burden caused by the pandemic and to relaunch the country that experienced an 8.8% GDP decline in 2020 and had had the second-largest public debt in the eurozone already before the pandemic. The recovery fund is a big step forward in the EU’s fiscal coherence and provides a significant opportunity to Italy; however, a lot depends on the government’s ability to make the country benefit from it. There is much optimism that Draghi’s high-profile government will successfully implement a series of political and economic reforms that can provide a panacea for Italy’s crisis-hit economy and reduce uncertainty in the country in the upcoming months.

Even though Draghi is considered to be a competent and reliable expert to lead Italy in this turbulent period, potential risks stemming from the heterogeneous nature of Italy’s nascent, cross-party-backed government should not be underestimated. It is undeniable that parties want to take advantage of being part of a government that will have a crucial role in distributing the EU’s recovery funds, but the cooperation on crucial challenges could become a root of disappointment. Therefore, the new government’s honeymoon phase might be shorter than it is currently expected. It is also a decisive question whether Salvini’s recent tactical attempt to shift his party towards a moderate direction will linger or he will simply return to his previous, anti-EU rhetoric. The new government will need to present its national recovery plan to the European Commission by 30 April at the latest; thus, Draghi needs strong political consensus and unity to present his reform plans and to realise his ambitious political agenda.


The opening pic is by Wikimedia Commons (Governo Italiano Presidenza del Consiglio dei Ministri), licence: CC BY-SA 3.0

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