Mario Draghi at the Quirinale Palace in Rome on February 3.
Photographer: Roberto Monaldo / LaPresse / Bloomberg
Photographer: Roberto Monaldo / LaPresse / Bloomberg
In less than a week, Mario Draghi managed to bring together warring parties from across the political spectrum in Italy, stimulating financial markets and projecting a new image for the country. In many ways, it is more than his predecessor has succeeded in over two years.
How did he get it out? “He is Draghi,” said an official involved in the talks, who asked not to be named. The former president of the European Central Bank is so strong, it seems, that suddenly everyone wants a piece.
Draghi’s history as a political decision-maker and his mediating skills contribute to the creation of a rare consensus in Italy, with potential opponents who consider it now politically risky not to support him. Thanks to the European Union’s recovery fund, Draghi also has 209 billion euros ($ 250 billion) to turn the country’s sick economy around – and he doesn’t want to run in the elections.
This is also an attractive recipe for markets. Italian shares and bonds have accumulated since Draghi accepted the mandate to form a new government. Italy’s 10-year yield spread to Germany, a key measure of sovereign risk, fell below 100 basis points last week to the lowest level in five years, and the nation’s benchmark stock index rose 1 , 9% up to a one-month high on Monday, led by gains in banks, which are sensitive to spread.
“I am confident that Draghi will use his extraordinary experience and strong leadership to make the right things happen,” European Union Chief of Staff Paolo Gentiloni said in an interview with the Financial Times. “He knows very well all the blockages, difficulties, challenges involved in carrying out reforms in Italy.”
Draghi, 73, is expected to conclude the second round of talks with the parties and could unveil his ministers this week.
The stakes could not be higher for Italy. The coronavirus pandemic caused the economy to shrink by about 9% last year and left more than 90,000 dead, while public debt is heading for 160% of production. The ECB’s bond purchase program has so far retained the ability to borrow the costs of borrowing, but there are questions about how long it can be sustained.
Draghi reaffirmed on Monday the possibility of a common budget of the euro area. This would help protect the Italian economy from the risk posed by its public finances, but would be a heavy sell-off for other members of the euro, who are worried they will take over for Italy’s problems.
Read more: The virus will force Europe to make a decision about Italy
In Rome, most parties seem to be queuing up. Many of the political leaders Draghi met did their best to present a pleasant face and easily pedal the problems that saw them collide with each other during the two tumultuous administrations of Giuseppe Conte.
Italy is accustomed to bringing in central bankers when politics fail
For many – some officials have noted – it is reassuring that Draghi does not seem to have any long-term political ambitions. For others, it is enough for him to look nothing like Mario Monti, a technocrat who once ruled the country and whom many voters associate with the horrors of austerity.
The center-left Democratic Party has pledged to support the former head of the ECB, with a party official commenting with approval that Draghi is certainly not another Monti.
Former Prime Minister Matteo Renzi’s Italy Alive party is also considered an early supporter. Even though he played a key role in Conte’s disappearance, Renzi is not close to the former ECB leader and has only had occasional contact with him, according to a person familiar with Draghi’s thinking.
The Five Star movement, the largest force in parliament, is divided, with some members clinging to their anti-establishment roots and others wanting to support Draghi. Five-star lawmakers fear early elections because party support has dwindled since the 2018 vote.
Probably the most important of the recent meetings of the former head of the ECB was with Matteo Salvini of the right-wing League, the party gave advice to get the most votes in the election. On Saturday, at the first meeting with Draghi, on Saturday, the left and right reduced their position on the strong line in terms of immigration, according to a person who was present.
Salvini also made atypical pro-European noises after years of slamming Brussels. This could be a chance, the party official said, for the League to clear its image abroad.
Read more: they betrayed the last leader of Italy, but Draghi needs them
When the two men met, Salvini let go of the charm, taking Draghi about his favorite football team and ending the meeting with a political joke. You participated in all these discussions, he told Draghi, you are not thinking of giving up your mandate now, are you?
Draghi just smiled. Salvini also came out and publicly announced his support for the former head of the ECB.
– With the assistance of Alessandro Speciale
(Updates with EU Commissioner Gentiloni on the fifth paragraph.)