Italy was facing a huge number of problems – and then was hit hard by the coronavirus pandemic. As Mario Draghi takes over as prime minister, he has set himself the task of reversing his country’s economic and political fortunes. Can he do it?
His tenure hadn’t even officially begun before he successfully performed a rather impressive political trick: Mario Draghi, the new prime minister of Italy, pacified Rome. Numerous politicians who had been firing off below-the-belt insults at each other just two weeks earlier were now sitting together in Draghi’s national coalition – from the left-wing fringe to the right-wing Lega.
Suddenly, they were all trying to act as though Draghi had been their idea. He is one of us, the powers-that-be in Rome were saying. “We have been working on this solution for a year,” said voices across the political spectrum. On Wednesday and Thursday, both chambers of parliament threw their support behind Draghi’s government with large majorities. It is both an astounding and curious development, the mood swings disorienting for outsiders.
“For non-Italians, it must be difficult to understand how such a thing is possible: The same groups that were fighting with each other a week ago now agree on everything. Unbelievable!” says Stefano Zamagni. “It is evidence of the failure of the parties.”
Zamagni is a professor of economics in Bologna and president of the Pontifical Academy of Social Sciences. In February 2020, just before the outbreak of the coronavirus pandemic, he was also the first to come up with the idea of pulling Draghi out of retirement and making him an adviser to the Vatican. “We have known each other for 35 years, he’s only four years younger than me,” says Zamagni.
“Enough to Make Your Hands Shake”
He is certain that Draghi is the right man for the job, even if there is a mountain of work awaiting him. Indeed, it isn’t an exaggeration to say that the country’s future will be decided in the coming weeks. At the end of March, the ban on laying off employees, which has been in place for a year, will expire. Labor unions fear a “social bomb” if struggling companies across the country suddenly let their employees go. In addition, a binding plan must be developed by the end of April for how Rome intends to efficiently manage the European Union’s corona recovery aid – a question that led to the demise of the previous government. And by summer, all Italians are to have received an invitation to be vaccinated, which will be an immense challenge for the country’s overworked health care system.
“This challenge is enough to make your hands shake. I will head to mass at dawn and pray,” says former prime minister Silvio Berlusconi. “My friend Mario needs all the help he can get, also from heaven.”
There are three deeper causes to explain the current political crisis. First, the country still hasn’t overcome the two-pronged populist assault, with the Five Star Movement and the Lega holding a majority in parliament and both still loyal to their anti-system identities. Second, Italy has long been struggling with the EU and trying to find its role in the bloc. And third, the country has been suffering through a lasting period of stagnation and is searching for a new societal model.
Perhaps that’s why the excitement over the new prime minister is so widespread. Indeed, the job he is now taking on is so thankless that anybody willing to accept it is immediately seen as a hero.
And sure enough, Draghi is already being venerated as a kind of redeemer. The fact that this man has to work with normal politicians, wrote former Formula One manager Flavio Briatore on Instagram, is almost like “Michelangelo having to discuss his paintings with people who paint crosswalks on the street.”
A solitary genius: It is an image that Draghi has been developing for quite some time. Indeed, the 73-year-old often led the coalition talks all by himself. And there have been no late-night press conferences of the kind his predecessor used to give. He also apparently has no use for Facebook likes.
“Suddenly, Everyone Is a Supporter of Europe”
When assembling his government, he used a guesthouse belonging to the Carabinieri to escape the spotlight. Not a word leaked to the outside. Even heads of parties received a curt response of “we’ll see” when they proposed themselves or their deputies for a specific post. Once the negotiations were over, Draghi read out the names of his cabinet members from a piece of paper in front of the TV cameras. And the list didn’t just come as a surprise to the viewing audience. One new minister learned of her appointment from the television news.
Mario Draghi – a former professor, an ex-financial official and the previous president of the European Central Bank – has slammed the brakes on an Italian political class that has become obsessed with selfies and Twitter. Italians had to wait a full two weeks before Draghi was finally ready to discuss his plans for the future in Italy’s national parliament on Wednesday.
He now has one or a maximum of two years to reinvent Italy with a strong European identity, a stable party system and an economic miracle similar to the one that came after World War II. He is, one might think, destined for failure. Or is he?
“Suddenly, everyone is a supporter of Europe,” says Emma Bonino. The 72-year-old is an icon of Italian politics: a former European commissioner and an ex-foreign minister, who has spent decades fighting on behalf of minorities, human rights and the EU. Ever since a bout with cancer, she has worn a headscarf that she ties around her head like a turban, a look that has become something of a trademark, and when she steps before the microphones, people tend to listen. After all, she embodies an image of Italy that has faded with the rise of populism.
Her party More Europe, though, is small, with very few Italians these days sharing her love of the EU. In recent years, only 30 percent of the country has indicated support of Europe in surveys, but that number has been rising in recent months. Conversations with Bonino reveal a woman who sometimes finds her own country incomprehensible and cannot understand why Italy was apparently prepared to gamble away the historic aid being offered by the EU in response to the coronavirus pandemic. She has known Draghi for decades and wanted to see him installed as a non-party prime minister right after the outbreak of the pandemic. “He is the best thing that can happen to us.”
In the Chigi Palace, the prime minister’s official residence, plans are currently being developed that are designed to catapult Italy from the bottom tier of the EU back into the upper echelon. It would be an impressive feat if the country were able to jump from the back of the line to once again having a weighty role in Brussels. Draghi wants to strengthen the EU, establish a fiscal union and to replace the EU principle of consensus in central political spheres with simple majority votes.
His program is difficult to swallow for many EU-critics in the Five Star Movement, and especially for Lega head Matteo Salvini, who was launching broadsides against the EU until recently, saying things like: “Europe is a cage in which they strangle you.” Still, Emma Bonino believes that Draghi will be able to turn things around. “He has an iron fist in kid gloves.”
Behind the Poker Face
It was almost exactly 30 years ago, on April 12, 1991, that Draghi took on a government position once before. He was appointed general director in the Finance Ministry at a moment that was similarly dramatic to the current one: The old party system was falling apart, the country was rocked by mafia killings and debt was exploding. The Italians got to know the economist, who had also worked for Goldman Sachs for a time, as a cool-headed crisis manager – first in the Finance Ministry, then as president of the Italian Central Bank and then as president of the European Central Bank (ECB).
“You never know what he is thinking behind his poker face,” says one banker. Draghi is seen as someone who does what he can to protect his private sphere and avoids too much social interaction while on vacation, preferring instead to read books for hours at the poolside, as hotel managers have said in recent interviews.
Draghi’s apparent lack of warmth is also a function of his biography, says Stefano Zamagni, his acquaintance from the Pontifical Academy. “He lost his parents as a 15-year-old, and as a student of a Jesuit school, he experienced a strict upbringing.” Still, says Zamagni, the neo-liberal label that has been attached to him is not entirely accurate. “He is extremely Catholic. He is very socially minded.”
Still, he remains something of a riddle to most Italians. He is a technocrat who lacks an overabundance of charisma. He prefers leaving the details to others. “When it came down to where the comma should go, he would leave,” says one ECB insider who worked together with Draghi. He would largely determine monetary policy over the phone, a style for which he became famous: If he needed a majority in the ECB Governing Council, he would organize it by way of bilateral telephone calls over his three Blackberrys. In the Council itself, there was hardly a need for discussion, with the body simply approving what Draghi had arranged.
His watch is set five minutes fast, so he is never late. And even during hectic negotiations of the kind taking place in Rome at the moment, he always takes the time to reflect on strategic considerations. At the ECB, Draghi likewise established a reputation for being a “Big Picture Guy.”
Enough for Draghi
Even his biggest coup – the “whatever it takes” pronouncement in summer 2012, which essentially saved the Eurozone from collapse – was engineered by Draghi on his own. Nobody in the Governing Council knew of his pending announcement that he would defend the euro with unlimited sovereign bond purchases, if necessary. Only the finance ministers of Germany and France were informed. That was enough for Draghi: He had hardly finished his statement before Berlin and Paris – conspicuously prompt – threw their support behind him. The panic on the markets quickly evaporated.
The fact that he has personal relationships with many of the decision makers in European capitals will now be of considerable help. At the recommendation of Chancellor Angela Merkel, he has also already met with Armin Laschet, the newly elected chair of Germany’s Christian Democrats (CDU).
Still, his close ties to Berlin cannot hide the fact that his reputation in Germany has not always been the best. He was long seen as the Italian who threw around money with both hands. The criticism, which occasionally crossed the line into contempt, affected Draghi more than he was willing to admit. He is, after all, considered an admirer of German stability. He isn’t used to a situation in which governments rarely change and policies are not abruptly reversed.
He was never shy about discussing his troubles with close advisers. He felt that Italy’s qualities – the creativity of its people, its solid industrial foundation and companies known around the globe – were frequently overshadowed by the constant political chaos and the schism between the north and the south. The country, he felt, was not living up to its possibilities.
Lucrezia Reichlin is among Italy’s best-known economists, and she worked at the ECB before transferring to the London School of Economics. She knows Draghi well, and she was even seen as a candidate to become his finance minister.
She is one of the few who is currently warning against overly elevated expectations. “It is highly likely that the government does not have a particularly extended time horizon,” she says. “I don’t think there is much space for implementing the fundamental reforms that have been under discussion for years. Italian politics are simply too fragmented.”
The list of problems is long. Growth and productivity are weak, sovereign debt is high and extensive bureaucracy combined with an extremely slow judiciary act as a brake on investment. It is more than a full docket for any new head of government.
Mario Draghi’s advantage is that he bought himself time by suspending the laws of politics for the time being. He has filled important posts not with party functionaries, but with experts. Important ministries will be led by specialists who have been tasked with quickly implementing EU specifications. Environmental reform, digitalization, economy and finance, judiciary, infrastructure: The central portfolios are now occupied by a physicist, a former central bank head, a constitutional lawyer and a former head of Vodafone. Draghi himself has taken charge of relations with Brussels.
Party functionaries have had to make due with slightly less important posts, though here too Draghi has taken a slightly different approach: Not a single party head has been appointed to a cabinet-level post, which has robbed Salvini in particular of the stage he had been hoping for. And to guard against being outflanked, Draghi has required antagonistic functionaries to seek reconciliation.
Antonio Tajani finds it an encouraging approach. As deputy head of Forza Italia, he leads the day-to-day activities of his party and is Berlusconi’s most important representative in Rome. “In World War II, Churchill invited the opposition into his cabinet,” Tajani says. “The same thing is now necessary in Italy.”
The corona crisis is forcing all parties to examine where they stand. From the Five Star Movement to the Lega, it was considered good form to criticize the EU while simultaneously seeking out closer ties with autocrats in Russia and China. Italy was the first country to open up the New Silk Road to Europe, says Tajani, who was president of the European Parliament until 2019 and who served for many years on the European Commission. “That wasn’t good.” Under Draghi, he says, European and trans-Atlantic relations are finally becoming a focus again.
“When the players from Juventus or Lazio Rom play for the national team, their club team is no longer important,” Tajani says. That is how party politicians should also now be approaching things, he says. “And once the virus is defeated, we will again campaign against each other.”
Can Draghi help Italy rediscover its commitment to the European idea? Will the Five Star Movement transform from a protest movement into a party that is open to compromise, as Germany’s Green Party once did? Will Salvini’s resentment-filled Lega find its way to becoming a conservative, pro-European party? Or will they all simply return to their own reflexes?
Draghi may not seem like a real Roman, says Stefano Zamagni, “more like a Westphalian or a Norwegian.” You likely have to tickle his feet to make him laugh, he adds. But there is no alternative to him.
The years since 1994 are considered in Italy to be the Second Republic, an era which began with the collapse of the old Christian democracy and which was marked by Berlusconi initially and then by the Five Star Movement and right-wing populism.
This Second Republic, Zamagni says, is now at an end.
When Draghi one day steps down, Zamagni hopes, “we will return to being a real liberal democracy. Just as we know from the past.”