The new Italian Prime Minister Mario Draghi.
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LONDON – The new Italian Prime Minister Mario Draghi is already transforming the political scene in Rome and causing the growth of the stock markets.
Following the recent political chaos, the former president of the European Central Bank has been called upon to become Italy’s new leader and save its turbulent economy. His arrival was described as “better than expected” after garnering widespread political support and stopping the threat of populist forces.
Draghi, who took the oath on Saturday, presented his Cabinet over the weekend – a group made up mostly of politicians from different parties and a few technocrats from key ministries.
“This is the best possible result and better than I expected, because it offers a degree of stability and political responsibility,” Erik Nielsen, the group’s chief economist at UniCredit, said on Sunday.
Draghi managed to get the support of most of the major political forces in Italy, after worrying that a pure technocratic team would have a short life. The next general election in Italy is expected only in early 2023.
The return of Mario Draghi, now prime minister of Italy, has dramatically changed the political landscape.
By providing broad political support and a diverse team, Draghi has already improved the outlook for Italy. Analysts have become more aggressive about Italian government bonds, citing “expectations of a more efficient use of NGEU (Next Generation EU) funds, structural reforms and a better outlook on vaccination,” according to a UniCredit note.
At the same time, the main stock index in Italy has risen by more than 7% since the beginning of the month.
Barclays analysts believe that economic growth will increase in the second half of the year as well. “The return of Mario Draghi, now Italy’s prime minister, has dramatically changed the political landscape,” Barclays analysts said in a statement on Monday.
They explained that the winner of the month-long political crisis appears to be the Anti-Immigration League party. The more centrist PD previously opposed the union of forces with the League and this new unit created tensions within the party. Meanwhile, the other major party, the Five Star Movement, saw internal divisions when it approved Draghi’s prime minister last week.
Sleeping populism
This could change the image of Italian opinion polls. The League is still the most popular political party, with about 24% of public support. However, the Five Star Movement and the PD – which formed the previous government – could face an obstacle. The PD, which enjoyed 20% of public support in January, lost one percentage point in a February 11 poll.
At the same time, Draghi’s arrival has softened the rhetoric of populism, at least for now.
“Today what we can say is that populism is weaker in Italy both for Draghi’s intervention and for the intervention of the pandemic and European integration,” Lorenzo Castellani, a historian at LUISS Guido Carli’s private university, told CNBC last week.
Italy had two main populist forces following the 2018 general election – the League and the Five Star Movement. But both have become less anti-EU now, Erik Jones, a professor at Johns Hopkins University, told CNBC on Monday.
“The Five Star Movement took its pivot when it supported Ursula von der Leyen (President of the European Commission) in June 2019; The league took its pivot when it decided to support Draghi in forming an open pro-European government of national unity last week, “he added.