Draghi forges consensus among warring parties in Italy
IN UNDER a week, Mario Draghi has managed to bring together warring parties from across the political spectrum in Italy, boosting financial markets and projecting a new image for the country.
How has he pulled it off? “He’s Draghi,” said one official involved in the talks, who asked not to be named. The former head of the European Central Bank’s (ECB) prestige is so strong, it appears, that suddenly everyone wants a piece.
Mr Draghi’s track record as a policymaker and skills as a mediator are helping to forge a rare consensus in Italy, with potential opponents reasoning that it’s now politically risky not to back him. Thanks to the EU’s recovery fund, Mr Draghi also has $250bn (€209bn) to turn around the country’s ailing economy – and he doesn’t want to run in elections.
That is an appealing recipe for markets too. Italian stocks and bonds have rallied since Mr Draghi accepted a mandate to form a new government.
Italy’s 10-year yield spread versus Germany, a key measure of sovereign risk, fell below 100 basis points last week to the narrowest level in five years, and the nation’s benchmark stock index rose 1.9pc to a one-year high, led by gains in banks, which are sensitive to the spread.
“I am sure that Draghi will use his extraordinary experience and his strong leadership to make the right things happen,” said the EU’s economy chief Paolo Gentiloni in an interview with the Financial Times. “He knows very well all the bottlenecks, the difficulties, the challenges involved in making reforms happen in Italy.”
Mr Draghi (73) was in Rome yesterday to conclude his second round of talks with parties and he could reveal his cabinet this week.
The stakes couldn’t be higher for Italy. The coronavirus pandemic caused the economy to shrink around 9pc last year and left more than 90,000 dead, while government debt is heading toward 160pc of output. The ECB’s bondbuying programme has kept
Italian stocks and bonds have rallied
a lid on borrowing costs so far but there are questions about how long that can be sustained.
Mr Draghi reaffirmed the possibility of a common euroarea budget. That would help protect the Italian economy from the risk posed by its public finances, but it would be a tough sell for some other euro members, who worry about picking up the tab for Italy’s problems.
In Rome, most parties seem to be falling in line. Many of the political leaders that Mr Draghi has met have gone out of their way to present an accommodating face and softpedal the issues which saw them clash with each other during Giuseppe Conte’s two tumultuous administrations.
For many – some officials observed – it’s reassuring that Mr Draghi seems to harbour no long-term political ambitions of his own. For others it’s enough that he doesn’t seem anything like Mario Monti, a technocrat who once led the country, and who many voters associate with the horrors of austerity. Arguably the most important of the ex-ECB head’s recent meetings was with Matteo Salvini of the rightist League, the party tipped to get the most votes in an election.
Mr Salvini made atypically pro-European noises at their Saturday meeting, after years of slamming Brussels. This could be a chance, said a party official, for the League to clean up its image abroad.