“Whatever It Takes!”

“Whatever It Takes!”

Mario Draghi to Begin Italy’s Rescue Operation after a New Political Crisis

02/2021  | Reading time: 7 minutes

Following an incredible political crisis, Italy has now a new government. While it was believed that the responsibility would fall again on Conte—for the third time in a row—an agreement between the majority partners was not eventually reached, and President Mattarella offered Mario Draghi that he could lead the new government. The former head of the European Central Bank has put together a partly technocratic partly political team, which is due to receive the confidence vote of the Italian Parliament. It is now time for the Italian government to concentrate all its efforts on drawing up serious plans to use the Next Generation EU funds. If they fail, the country will face a complete economic breakdown.

Who would not like a government crisis during the most dramatic period his country has had since the end of World War II? Who would not be happy if those people scrambling for a bunch of seats or a better approval rate in the opinion polls were the very same people who have just a few weeks left to draw up a recovery plan, following the worst health and economic crisis that the country has and, hopefully, will ever go through? Well, if you are not Italian, you are missing out!

“La terra dei cachi” (The land of persimmons) is the title of a very popular song from the late 1990s talking in a humorous way about some of Italy’s most blatant absurdities. The song says that things that would seem unreasonable, irresponsible, and even impossible in some countries are seen as widely accepted possibilities in Italy. With this in mind, it is not a surprise that, when things in Italy seemed to get better—the coronavirus pandemic that has already killed more than 90,000 people in the country appears to have been brought “under control,” the long-awaited vaccine has finally arrived, and many thought the Italian government was left but one big concern: to allocate the massive resources from the Next Generation EU (NGEU)—something shocking happened. Apparently out of the blue, a man, heedless of the circumstances, decided that it was time to plunge the country into a fresh, and, to most of the people, incomprehensible political crisis.

Mario Draghi, the former head of the European Central Bank and the new Italian prime minister
Source: Alexandros Michailidis/Shutterstock

Bad timing apart, the existence of the previous government has been tied to a very fragile equilibrium since its conception. The ideological differences between the coalition forces were far too big, and only the emergency due to the pandemic kept them together for so “long.” The cabinet crisis culminated with PM Giuseppe Conte’s handing in his resignation on 26 January, and, a few days later, after a failed attempt to form a new executive with the same majority, President Mattarella entrusted the leadership of a new technocratic government to Mario Draghi, the former head of the European Central Bank (ECB) and the man who, in 2012, “saved” the Eurozone. Conte’s suffered decision came after he had realised that, without Renzi’s party, he would not command a majority in the parliament anymore. Instead of calling an election, which would have required special anti-COVID measures, and long time before reaching an agreement on a new government, President Mattarella chose to give a mandate to a “high-profile cabinet” with the responsibility of planning the use of the Next Generation EU funds and relaunching the country. Unlike Mario Monti, who also formed a technocratic government in 2011, Draghi entrusted only the most important ministries to technocrats, while members of the political parties obtained the rest. The new governing team is ready to go through the confidence vote procedure in the parliament, but, to do so, it had to wait for the result of an online referendum requested to be held on Thursday by the members of the Five Star Movement (Movimento 5 Stelle, M5S). Interestingly, Draghi expected to receive the endorsement of all the political forces—including Matteo Salvini’s League (Lega)—with the only exception of the far-right Brothers of Italy (Fratelli d’Italia, FdI) and a fringe group of the M5S’s MPs which could vote against its party’s official direction.

How did we get here?

Even if the crisis came as a shock to many, and especially to international observers, it had been in the air for some time. Tensions among the coalition partners had been lingering, and their ideological differences over many crucial issues had paralysed the country’s decision-making process. The recent collapse just represented the failure of this far-fetched political experiment. The so-called “yellow–red government,” which included the M5S, the Democratic Party (Partito Democratico, PD), Renzi’s Italy Alive (Italia Viva, IV), and other smaller left-wing parties, was a compromise solution adopted to exclude Matteo Salvini’s party, the League (Lega), from governing positions and a fix for the impractical coalition between the right wing and the populists, which had governed Italy from July 2018 until August 2019. Ironically, the very same person who was instrumental in the creation of this executive, Matteo Renzi, was also its fiercest critic and the man who bears the responsibility for its fall.

A few weeks ago, the Tuscan senator decided to withdrew his small—yet crucial—party from the governing majority, leaving Conte, who unsuccessfully tried to find enough “responsible” MPs ready to replace the IV’s representatives, with no choice but to resign. President Mattarella—once again—accepted Conte’s resignation but left him in charge as caretaker until a new government was found. Wasting no time, the president met the delegations of all political forces in order to find a solution to the crisis and to learn whether Conte had enough support to lead a new government, whether there is someone who could replace him, and whether, as a nuclear option, he needed to dissolve the parliament and call new elections.

For a few days, the European Union anxiously followed the developments in Italy, trying to understand who would be responsible for handling the crucial Italian recovery operation. In fact, all EU member states have just a few weeks left to present workable plans for using the first tranche of NGEU funds due to arrive already at the beginning of April. At the moment, all Southern European countries have already presented some ideas, but Italy, the biggest beneficiary of the instrument, is still missing a concept and must hurry now if it wants to meet the first deadline. Failing to do so would be enormously harmful to not only the Italian economy, which registered a 8.9% loss in GDP terms last year, but especially the country’s political standing. Under this scenario, the EU’s third-biggest economy, which was one of the most vocal advocates of European debt mutualisation, would lose its credibility, suffer irreparable damage, and those who were betting on Rome’s inadequacy to use this once-in-a-lifetime opportunity would be once again proven right.

The incumbent prime minister Giuseppe Conte
Source: Vasilis Asvestas/Shutterstock

What were the reasons for the dispute?

Fatefully, the crisis developed precisely around the management of the NGEU’s funds. Already in December, Renzi criticised the government’s blueprint for using the EUR 209 billion of the NGEU reserved for Italy, as well as the PM’s idea to assign the management of these resources to an external task force, as Conte’s proposal to entrust control over the EU funds’ to a body of experts detached from public authorities caused a stir in the parliament and fuelled Renzi’s discontent. No matter how questionable this idea was, the fact is that Italy has historically not been able to efficiently allocate and then to properly spend the EU structural funds due to its excessive red tape and incompetent civil service. Conte hoped that his pool of experts, specifically dedicated to the task, could help the country’s administrators deal with the job. However, the feud between Renzi and Conte included several other issues. The Tuscan politician also condemned Conte’s inclination to centralise decisions, to sidestep the parliament, to refuse the European Stability Mechanism’s (ESM) EUR 37 billion loan for Italy’s national health service just because of ideological reasons, to push for welfare measures instead of investments, to back an irrational draft reform of the judicial system, and to create and supervise a new intelligence institute. Despite the fact that a compromise was eventually found on some issues, Renzi decided to withdraw the IV’s ministers and provoke a cabinet crisis, confirming the suspects of those who accused him of mostly following his interests.

Although some of the criticism against it was well-founded, Renzi’s cynic decision to spark off a major political crisis regardless of the emergency should mostly be understood as a calculated political strategy. Since the creation of his party just sixteen months ago, the former PM has not been able to gain political support, and polls show that the IV lies just above the 3% electoral threshold. As a last attempt to turn his political fortunes around—the next Italian parliament will be smaller, and the proposed reform of the electoral law could set a higher 5% threshold—Renzi decided to start a war against Conte, who is bound to become a major political actor in the future. Aware of his coalition partners’ unwillingness to go to an early election—should Italy go to the polls, the centre-right forces (Salvini’s League, the FdI, and Silvio Berlusconi’s Forza Italia) are projected to easily win—Renzi tied his support for a new cabinet to a series of conditions. As expected, his requests (such as the withdrawal of the draft judicial reform, the dismissal of its conceiver, and immediate access to the ESM loan) were deemed unacceptable, leaving President Mattarella no other option but to opt for a so-called “presidential solution.” The gamble eventually paid off, and Renzi not only achieved Conte’s replacement and more influence on the new cabinet (which he can use until the next vote in 2023) but also forced all the other political forces to take a stand so they can avoid being excluded from this “hour of responsibility.”

Matteo Renzi
Source: Vasilis Asvestas/Shutterstock

Why “eliminating” Conte was so important for Renzi?

Since his appointment as prime minister, the former law professor without any party affiliation took confidence of his appeal among Italian “centrist” voters. Emboldened by his popularity, Conte will likely create a new moderate political party which will try to fish in the same electoral pool where Renzi and others wish to achieve consensus among the members of their possible electoral base. At the moment, nobody offers a reliable political alternative to Italian “centrist” voters, so a large part of them rather chooses abstention. Berlusconi once succeeded in attracting the liberal–moderates to Forza Italia’s orbit, but, now, as his political success vanishes, no other political force is strong enough to conquer the “centre.”

To the right of Forza Italia, the League is trying to switch to a more moderate attitude but with little success. By supporting Draghi’s government, the League is trying to make one step forward in this process and present itself as a responsible intermediary. In the meantime, the less Eurosceptic and extremist elements inside the League are slowly taking control and challenging Salvini’s leadership, aiming at moving the party more to the centre both in Italy and in Europe. However, the competition is even fiercer on the Left. Apart from Renzi, who will work hard to chip away at the political support the M5S and the PD enjoys from now until the next election, a group of other small forces with pro-business, liberal, and pro-European platforms is emerging. And Conte’s party is one of them. The former PM’s hypothetical party performs surprisingly well in the opinion polls; it is estimated around 15% and 17%. If the polls are not mistaken, Conte will have the opportunity to be the leader of Italy’s second-biggest force behind the League. Consequently, Conte’s “elimination” was a matter of survival for Renzi and essential to his aspiration to become the beacon of the Italian liberal–moderate electorate.

Renzi, therefore, had to replace Conte rapidly, and once—not unexpectedly—the name of Draghi was announced, offer him his immediate and unconditional support. Renzi’s instincts made him once again the real king-maker of Italian politics, urging all the other political forces to accept the fait accompli and to adapt their strategies to the country’s changed mood. While the Tuscan politician scored an important “victory” inside the palazzi (this is how Italians often refer to the places where political decisions happen), the story is completely different from the outside, and it is highly unlikely that Renzi will be able to capitalise on this result in the next election. As a matter of fact, the former prime minister is the least popular Italian politician, and his approval rate is decreasing now, after the cabinet crisis.

So what now? What are the new government’s priorities?

The pandemic, the economic downfall in its wake, and Italy’s economy that has been stagnating for decades are, at the moment, the main concerns for Italians. When, in a few weeks, the regulation which introduced the wage support and imposed a ban on lay-offs expires without the subsidies-to-business decree (decreto ristori) being ready, we will see better the real effects of the crisis. The new government has, therefore, the duty to implement a clear and workable strategy to tackle these repercussions.

Empty streets in Florence
Source: Ylenia Cancelli/Shutterstock

As for the pandemic, even if the situation is way more sustainable today than it was in spring, Italy has still one of the highest death rates in the world, and the vaccination programmes need more rapid and functional planning. In order to succeed in these tasks, the Italian government must make proper use of the NGEU funds and present serious plans to the European Commission quickly. That is the reason why now, more than ever, the focus should be on the EU, which has not hidden its satisfaction with the changes happening in Rome. In fact, with this latest cabinet change, Italy is sending a very important message to its European and international partners in a moment when the growing mistrust towards the Mediterranean country reached emergency levels. Clearly, Mario Draghi is the best choice for the country, since he is the only person with the necessary skills and know-how to relaunch the country before the economic and social situation renders its recovery impossible. Draghi’s management of the eurozone crisis has been widely considered a success in not only Europe but also the United States, where the Italian economist is highly esteemed. This brings hope to Italy that it will have similarly successful crisis management. Draghi’s strategy would likely be trying to revive and restructure the Italian corporate sector and reversing the former governments’ inclination to centralism and assistencialism, which mostly used EU and national capitals for state-granted aids instead of savvy investments in crucial sectors. Moreover, the former head of the ECB is expected to dedicate important resources to fostering growth and introducing long-demanded structural reforms in fields such as education, justice, and civil service. Now, the responsibility of Italy’s transition lies in the hands of Draghi, and Italians hope that he will complete it “whatever it takes.” The only regret is that Draghi was chosen too late, with too much hesitation, and with the feeling that a lot of precious time has been lost.

 

The opening pic is by Massimo Todaro/Shutterstock

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