Political uncertainty in Italy is a problem for Italy and Europe

By Maria Tadeo

Much of Europe assumed that Italy had entered a new era when Mario Draghi was appointed prime minister on February 13, 2021. As of Thursday, however, nearly a year and a half later, the Draghi era appears to be coming to an end.

Draghi submitted his resignation after part of his coalition “rebelled”, abstaining from a vote he considered crucial to his remaining in office. The country’s president, Sergio Mattarella, rejected the resignation and suggested Draghi address parliament and seek new support next week. This buys Draghi time and the possibility to avoid early elections by forming an alternative coalition.

Still, the eurozone’s third-largest economy is once again mired in political uncertainty. This is bad news for Italy and Europe and a wake-up call for international investors. Great hope has been dashed that the prime minister will guarantee improved public finances and economic growth in a country that has not seen much in years.

All this happens at the worst possible time and under the worst possible circumstances. We are a few days before the European Central Bank presents a tool to deal with the crisis, which will greatly benefit the country by narrowing its bond spreads. This is further proof that Italy’s political class is incapable of looking ahead to the next election cycle.

Even in the country’s most difficult moments, Rome cannot help but put party interests above the national interest. As a result, not only has Draghi’s reputation been tarnished, Italy risks losing its seat at the Brussels table alongside Germany and France. It was his prestige – as a former ECB president who bailed out the European Union amid the euro crisis – that gave Italy this new influence. All this is now an illusion, thanks to the practices of domestic politicians.

Take for example Giuseppe Conte, the estranged leader of the Five Star Movement who was the driving force behind Draghi’s move to resign. Conte justifies the current government crisis by arguing that Italy is facing serious economic problems and that Draghi has not listened to his demands on inequality. He is not willing to take responsibility for the fall. But you can’t be in the government and work against it.

There are some real ideological differences between the two men. For example, Draghi approves sending weapons to bolster Ukraine, but the Five Star base does not. Most of the recent drama, however, is an attempt to revive Conte’s party in the polls, even though the election guarantees nothing for Five Star in terms of seats. Meanwhile, the economic crisis that Conte says he wants to alleviate will be amplified by the turmoil he has created.

The next general election will be held in the spring of 2023, but there is plenty of room for improvisation in Italian politics. If Draghi can form another coalition, he should do so and lead the government until the winter. The prime minister does not like to get his hands dirty with petty politics, but the extra time would prevent an immediate election campaign. In his previous position as head of the ECB, Draghi restored confidence in the euro with a simple phrase: “Whatever it takes.” This time, he could do the same for Italy by simply staying put. It’s not the ending he was hoping for. In fact, it’s the mess he wanted to avoid. But no one has a clean exit from Italian politics.

His stay will give him a chance to mitigate whatever comes next. If recent polls are to be believed, the far-right Brotherhood of Italy party will likely win the next election. Its head, Georgia Meloni, has benefited enormously from the confrontation with Draghi. (It is the only major political group not in his coalition). He is wasting no time and calling for elections. If Italy’s Brothers win the most seats, it would send shockwaves from Rome to Brussels. It would undo much of what Draghi has achieved since February 2021. Markets would panic at the prospect of, once again, Italexit.

While international analysts are very optimistic about post-Draghi Italy, I am not entirely convinced that Italexit will be as immediate as it has been in previous political upheavals – even if Meloni prevails. The issue has, for the most part, disappeared from public discourse. Only a small portion seriously desire it. Politicians raising the issue are using it as a bargaining chip to claim concessions from Brussels.

Perhaps the greatest achievement of the Draghi era has been a form of restraint. In 2018, Italy was rocked by a populist earthquake that saw both the far right and left gain power and influence as voters pushed to transform what they saw as a government that was no longer performing. The new government promised transparency and an end to political intrigues. That didn’t work. Draghi was appointed (never elected) to fix things. His term in power was expected to be short. The next best hope – if and when the next election comes – is that Italians do not return to the travesty of politics they voted to dismantle four years ago.