Mario Draghi: The silver lining in his departure

Most reasonable international observers were mystified by the circumstances that led to the end of the Draghi government. Having achieved so much in only eighteen months, and with only 9 months to the natural end of the legislature, one cannot help but wonder why the Italian parties and parliament have decided to vote against the will of the majority of Italians, not to mention Western leaders, to cut short this incredible government. During the last 552 days, Mario Draghi, Italy’s thirtieth Prime Minister since World War II has achieved targets that have eluded most of his predecessors:

– He was instrumental in the implementation for Italy of the European Recovery plan, which awarded Italy one of the largest allocations in Europe, in return for a package of reforms;

– All the required reforms were delivered on time until now;

– These actions have initiated a virtuous circle of investment and increases in productivity that will last a generation;

– He presided over a 6.6% rise in GDP, among the best results in Europe after the Covid recession;

– This helped to reduce the widely watched Debt/GDP ratio by 4.5%;

– He was easily the most respected Italian leader of the last forty years, responsible for coordinating the West’s response to Russia’s aggression, and visibly part of Europe’s top leadership together with France and Germany;

– He quickly acted to replace Italy’s dependence on Russian gas by striking deals with north African and middle eastern countries.

But the list of necessary reforms is not finished. Draghi wanted to complete his tenure by also achieving long lasting changes to increase competition, restructure the Tax Code, and make welfare payments more efficient. Had Draghi not resigned, most of these reforms would have been part of the 2023 Budget, but achieving them on the eve of the national election campaign would not have been easy.

The decision is now going to go back, democratically, to the voters. If the ‘Draghi effect’ continues, his Agenda will be adopted by a government that will have the votes in parliament to back a decisive 2023 budget without having to worry about elections on the horizon. With the populist left in shambles, the risk is now that the populist right will win the elections and seek to undo Draghi’s work. But the fact that most of the parties that caused the fall of his government have already splintered into groups that have committed to back the Draghi agenda, gives cause for cautious optimism that the foundations he laid in the last 18 months will constitute a structural change in the Italian economy that will last for decades to come.

The Vaccine Saga

Italy is a country historically rife with conspiracy theories.

In the past, they have ranged from who were the political backers of the Red Brigades (the Americans or the Russians?), to why Juventus wins so many championships (the Agnellis control everything), to how gnomes in New York play with Italian politics by ‘adjusting’ the BTP/Bund spread. There are many more examples.

Today, the mother of all conspiracies is why Italy is not getting enough people vaccinated. The argument goes that other non-European countries are somehow deviating Italy’s supplies of vaccine. The reality is that Italy is suffering the results of the incapacity of the EU to manage the centralised purchase of the vaccines for hundreds of millions of Europeans at the same time. The EU is an institution that is quite good at putting on the brakes, not at swiftly making things happen. The EU’s executive is appointed and not elected. Its appointers are not looking for charismatic leaders that could eclipse them, they are rather looking for dependable administrators who will follow the protocols. The problem is that the EU had no experience in negotiating purchase agreements of this size and in order to ensure it be seen to do the right thing, it wasted precious time in negotiating with a fine tooth comb and arguing for better prices. The problem is that it didn’t recognise that there are times when price is irrelevant and redundancy crucial. Israel and the UK understood much earlier that it doesn’t matter if you pay $30 (apparently what Israel agreed to pay) for a vaccine or around $10, like the EU did. Every extra week of lockdown is worth a lot more than a few dollars of savings, especially in the midst of a pandemic.

Mario Draghi is credited for having saved Italy and the EU in the midst of the financial crisis. He will now have to apply his ‘we will do whatever it takes’ modus operandi to independently acquire vaccines if he wants to prevent League leader Salvini and his Fratelli d’Italia colleague from running on a very popular vaccine-denial, anti Europe platform in the near future.