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The Challenges of Mario Draghi. What will be the future of Italy and Europe?

The Challenges of Mario Draghi | IE School of Global and Public Affairs

A discussion on the challenges of Draghi in reforming the country and creating stronger bonds with the rest of Europe.

This is a make it or break it moment for Italy. The Draghi Government success or failure in deploying the recovery funds and embarking on key reforms will be critical for the future of the country and Europe. This was the shared opinion of the experts at an online session hosted this week by the Transatlantic Relations Initiative of IE School of Global and Public Affairs and the Observatory of the European Union (EU).

Gianluca Passarelli, Professor of Political Science at the Sapienza University of Rome, and Marta Dassù, Senior Advisor for European Affairs at the Aspen Institute, were the panelists of this conversation moderated by Michele Testoni, Adjunct Professor of International Relations at IE School of Global and Public Affairs.

As Passarelli pointed out, reputation is one of the keywords to understand the complexity of Italian politics nowadays. Mario Draghi has a great reputation inside and outside Italy, which represents a big opportunity. His appointment, as head of the government has obliged political parties to change their strategies, but the problem now is the economic crisis, he explained.

“Draghi should avoid that this economic and social crisis transforms itself into a sort of institutional and political crisis.”
Gianluca Passarelli, Professor of Political Science, Sapienza University of Rome

According to Dassù, Italy is suffering not only from the social and economic repercussions of the COVID19 crisis but is the result of a long-standing crisis: that of chronic low productivity. In a sense, the country never recovered from the financial crisis of 2008. “This is a systemic crisis and the real problem is that the social and economic crisis is starting to affect also the political setup of our country.”

“Draghi is well aware that his success depends on the support of the political parties, so he has to convince them that the policies that he will implement will be important to them,” Passarelli said, suggesting that his biggest ally could be the people. “He is not delivering too many speeches, he is not intervening in the political arena, because he knows he hasn´t any party that supports him deliberately. I am a bit provocative here, but I think that his biggest ally can be the people. So Draghi can be a true populist, in a sense.”

Regarding the economic situation of the country, Dassù, who was Italy’s Deputy Minister of Foreign Affairs from November 2011 to February 2014, reminded the audience that without the ECB’s support, Italy’s public debt, which is now over 160% of the GDP, would not be sustainable. Furthermore, she highlighted that Italy is the main beneficiary of Next Generation UE with some 210 billion euros to be spent by 2026. “This will be crucial for Italy, but also for Europe because the credibility of this new and ambitious joint economic undertaking of common debt will be tested in the case of Italy. So high stakes, indeed, both for Italy and for Europe at the same time,” she pointed out.

Draghi can be seen as a pragmatic federalist with clear ideas about the composition of the European Monetary Union, the need for a capital markets union and the need for fiscal capacity, leading in time to a European budget based on euro bonds.

In comparison to Mario Monti, who was in charge in a period of fiscal tightening, Draghi is asked to spend or invest as wisely as possible loans and grants coming from Europe, argued Marta Dassù. “The key question is if Draghi will make it or if the forces which have stalled Italy for 2 decades now are so strong to defeat even him.”

In her view, “the main political mission of Draghi´s government at the crossroad between domestic and European policy is to bring about an evolution of the Liga from a euro skeptical party to a euro mainstreaming party.”

“This transition of the Liga is an important condition to unblock the Italian political system and close the populist nationalist cycle,” she continued.

“As the third economy in the euro area and with a skyrocketing public depth, Italy cannot afford to be a sort of Hungary writ large.”
Marta Dassù, Senior Advisor for European Affairs, the The Aspen Institute

For this reason, according to her, Draghi´s fundamental mission is to enable the Italian political system to alternate between center-right and center-left.”

Passarelli also sees a big opportunity in the international arena. “Draghi has clearly indicated that Italy should keep its foot in the European and in the Atlantic field and not jump here and there, from China to Russia, and America. I think that for the first time in the last 25 years, Italy is now at the center of the political debate for good reasons and not because of rumours.”

“I think that for once in the last probably 25 years, Italy is now at the center of the political debate for good reasons and not for rumours.”
Gianluca Passarelli, Professor of Political Science, Sapienza University of Rome

Dassù, who is also a board member of the European Council on Foreign Relations, agreed and considered that Draghi could be able to rebuild the trust in Italy. In her opinion, rebuilding trust among European member States is fundamental to modify the north- south fracture on financial issues. “He will also able to change, by definition, the intra- European balance of power, adding his voice to those of Merkel and Macron.”

“Mario Draghi will be able to change, by definition, the intra- European balance of power, adding his voice to those of Merkel and Macron.”
Marta Dassù, Senior Advisor for European Affairs, the The Aspen Institute

She further asserted that Draghi has a pragmatic view of Europe and will likely make the case for more flexibility, underlining the link between national responsibility and European solidarity. Within the European debate, Draghi will be closer to Macron on economic issues. “Yes, Draghi has had a personal relationship with Angela Merkel for a long time, but she is outgoing and domestic balances in Germany are shifting.”

In her view, with a more influential Italian voice at the table and with a more introverted Germany until the end of 2021, the dominance of the Franco-German axis could become less evident, which opens a space for larger alignments, including with Spain. “But all that will depend on the execution of the recovery plan,” she stressed.

All three participants concluded by highlighting that what is needed in Italy is a national and collective effort and not only a change of attitude from the main political parties.