What can be expected from the Draghi government

When it is in dire need, Italy has a history of reaching for figures outside the political spectrum to right the ship of the state. The rise of the former ECB President fits that pattern, but only to a point: can the Draghi government bring pragmatic solutions to the table?

Mario Draghi photographed shortly after he agreed to take over as Italy’s head of government
Rome, February 12, 2021: Mario Draghi, Italy’s prime minister-designate, produces a nearly radiant smile (something unusual for him) at a news conference following his meeting with Italian President Sergio Mattarella © Getty Images

In a nutshell

  • Italy has a history of non-political heads of government
  • Mario Draghi’s coming to Rome inspired unrealistic hopes
  • The former ECB head will focus on securing EU funds

Italy has developed an original method over the last three decades for coping with intractable challenges and political decision-making in complicated times. It is based on the assumption that, in dire need, figures who are outsiders to political parties (but not to the ruling class at large) can be relied upon for pragmatic problem-solving. The coming to Rome of former European Central Bank President Mario Draghi fits that scheme, but only up to a point.

Mixed record

In 1993, Italy was traumatized by judicial investigations that raised very disturbing questions about the moral fitness of its political class. The government led by Giuliano Amato, a law professor and lifelong politician (now a member of Italy’s Constitutional Court), resigned and the president of the Republic sent for Carlo Azeglio Ciampi, at the time the governor of Italy’s central bank (1979-1993). 

Mr. Ciampi dealt with what was probably the weakest parliament in Italy’s republican history, as it was populated by parties that lost all legitimacy and were about to be wiped away. The first non-parliamentarian ever made head of the Italian government brought on ministers of his own choosing (from the ranks of political parties) and won a parliamentary vote of confidence. 

During his yearlong term, Prime Minister Ciampi faced mounting public discontent with the country’s political class, the crumbling of its political system and ongoing financial instability. His main accomplishment was the passage of a new electoral law, which led to elections won by Silvio Berlusconi. Later on, he served as treasury minister (1996-1999) and president of the Republic (1999-2006), without formally joining a political party.

Prime Minister Draghi’s resume is similar to these of ‘technical’ prime ministers but with an unparalleled cursus honorum.

In the mid-1990s, a government led by Mr. Berlusconi collapsed after one year in power, as it was abandoned by the Northern League (which briefly became a secessionist movement). It was too soon after the previous elections to hold an early one, and the country’s financial condition remained precarious. At this hour of need, Lamberto Dini, a former director general of the Bank of Italy and treasury minister in the Berlusconi cabinet (1994), was tapped for the prime ministership. 

The appointee assembled a largely independent group of ministers, in most cases free of party affiliation, and kept the responsibility of the treasury for himself. The Dini executive began with a blessing from Mr. Berlusconi and then was backed mainly by the left. It accomplished a much-needed and difficult pension reform. Mr. Dini established a political party of his own; it was part of a center-left coalition in the elections that followed.

In 2011, another Berlusconi government crumbled (that time, the culprits were Italy’s dire financial condition and indiscretions in Mr. Berlusconi’s personal life that made him an object of international ridicule). The head of state sent for the economist Mario Monti, a Bocconi University president, a monetary policy specialist and a former EU commissioner (1995-2004) who had long theorized about the need for “grand coalitions” to accomplish effective reforms. Mr. Monti chose his own ministers and was backed by Italy’s centrist-leaning parties. 

By the time he left the post in April 2013, he had raised taxes to put the budget deficit more under control, reformed pensions and managed to restore the country’s credibility abroad. Unlike Messrs. Ciampi and Dini, Mr. Monti was made a senator for life (a discretionary appointment by the head of state) before leading the government. However, like Mr. Dini, he went on to create a political party. It attracted about 10 percent of the vote in the 2013 elections but vanished soon after. 

Presumed miracle man

Prime Minister Draghi’s resume is similar to those of the “technical” prime ministers Ciampi, Dini and Monti – but with an unparalleled cursus honorum. He started his career as an academic, like Mr. Monti, but ascended quickly into the highest echelons of administration and business. His many elevated positions included director general of the Italian Treasury Ministry (1991-2001), vice-chairman and managing director of Goldman Sachs (2002-2005), governor of the Bank of Italy (2006-2011) and ECB president (2011-2019).

The Draghi government was preceded and led by Giuseppe Conte (2018-2021), which was ousted due to political maneuvering. Former Prime Minister Matteo Renzi (2014-2016) capsized the ruling left-wing coalition in February 2021 by shrewdly leveraging his small party’s votes and assailing the government’s plan for spending money from the so-called Next Generation EU fund. Indeed, Mr. Conte’s cabinet seemed incapable of devising a suitable scheme for allocating the money Brussels makes available to member states for fighting the Covid-19 crisis and adjusting their economies to other tectonic changes. Even though the coalition partners – the Democratic Party and the Five Star Movement (M5S) – attempted in every way to keep Mr. Renzi happy and Mr. Conte prime minister, the former prime minister refused to be placated. In the end, President Sergio Mattarella sent for Mr. Draghi. 

Even though Italy’s public debt now hovers around 160 percent of GDP, fiscal consolidation is not on the agenda.

The pandemic makes an early election unlikely. Also, the recently enacted reform that reduces the ranks of parliamentarians by a third motivates the sitting deputies to extend the current parliament’s term – and their salaries and perks – for as long as possible. 

That Mr. Draghi could become prime minister changed the landscape of Italian politics in a flash. The appointee sought to have the widest possible majority; instead of limiting himself to the pool of Mr. Conte’s supporters, he has reached out to the right-of-center parties. Leader of the national conservative “Brothers of Italy” party Giorgia Meloni chose to remain in opposition (and wait for the new government to disappoint), but both Mr. Berlusconi’s Forza Italia and Matteo Salvini’s Lega (formerly Lega Nord, or Northern League) have accepted Mr. Draghi’s invitations. Hence emerged the broadest majority on record, much wider than that of Mr. Monti’s in the previous decade. 

The new cabinet

The arrival of such a political rainbow coalition may seem logical. Even though Italy’s public debt now hovers around 160 percent of GDP, the new government’s agenda is not one of fiscal consolidation, spending cuts or tax hikes. The sensible allocation of the estimated 209 billion euros of the Next Generation EU largesse that has been earmarked for Italy is the top priority for the Draghi government.

A picture showing Italy’s president, prime minister and some members of the country’s new cabinet
Rome, February 13, 2021: the government swearing-in ceremony at Quirinale palace. Standing in the front are President Mattarella (L) and Prime Minister Draghi; behind them, from the left, are cabinet members: Roberto Cingolani, Vittorio Colao, Stefano Patuanelli, Renato Brunetta, Enrico Giovannini and Mara Carfagna. © Getty Images

Eight ministers in the Draghi government are from outside the political parties, though only one of them – Economy and Finance Minister Daniele Franco, who had a long career that culminated in her becoming Director General at the Bank of Italy and who had previously been the General Accountant of the State – can be branded as a loyalist to the prime minister. The others are closer to political parties. Seven ministers come from the previous cabinet ranks, including Minister of Interior Affairs Luciana Lamorgese and Minister of Health Roberto Speranza. The M5S leader Luigi Di Maio will continue to serve as foreign minister. 

When called to steer Italy out of the mess produced by political parties, Mr. Draghi chose not to humiliate them.

Forza Italia and Lega have three ministers each, but what is particularly important for small businesses in northern Italy is that the economic development post went to Lega’s economic mastermind Giancarlo Giorgetti, and tourism to Massimo Caravaglia from the same party.

The M5S was lured into the Draghi government with a chance to run a new ministry for “ecological transition,” similar in concept to the one in France. However, responsibility for it was entrusted to scientist Roberto Cingolani, not known as a fan of the party’s founder Beppe Grillo. The Democratic Party is well represented by ministers who belong to its various internal factions.

So, when a technocrat was called again to steer Italy out of the mess produced by political parties, Mario Draghi chose not to humiliate them. He prefers to keep the parties on board. How does this augur for the future of his government and Italy?

Big coalition majorities tend not to last long. Italy is due to elect a new head of state in 2022 and renew its parliament in 2023. The current grand coalition is unlikely to last until 2023; it may well disband after a new president is chosen. This scenario would clear the way for the general election that Mr. Salvini, the likely winner, craves.

Fantasies and the reality

What can the Draghi government accomplish in such a tight time frame? The Italian and foreign press, mesmerized by the prime minister’s resume, fantasizes about the new government undertaking ambitious reforms, from the tax code to the labor market. Yet such a large coalition makes reforms unfeasible. Whatever his cachet may be, Mr. Draghi cannot outweigh a parliament where the populists of the M5S remain the largest faction. 

The new prime minister will most likely focus on the priorities of the day: devising a national recovery plan that would secure EU consent and deal with the pandemic, especially accelerating the vaccine rollout. On such matters, political parties can quickly agree.

A few ministerial appointments are distant from this immediate battlefield but have some signaling value. As the public administration minister, Mr. Draghi chose Renato Brunetta, a Forza Italia economist who gained a certain notoriety for his battles with public sector employees when he served in Mr. Berlusconi’s cabinet. And the prime minister sacked Minister for the South Giuseppe Provenzano, a left-wing scholar who was highly esteemed by Mr. Conte and appointed Mara Carfagna, a centrist Berlusconian who is credited with an inclination toward a less statist, more liberal approach to policymaking. Also, Mr. Draghi tapped former Vodafone CEO Vittorio Colao to lead the state’s digital transformation.

Scaling down the government’s interventionist propensities might be enough to foster free enterprise.

The presence of these officials suggests that the new cabinet may attempt to increase the efficiency of the Italian bureaucracy. Likewise, the Catholic economist chosen for the education slot, Patrizio Bianchi, was apparently in favor of reopening the schools earlier during the pandemic. Since the longer-term consequences of Covid-19 can be dire for human capital, this appointment suggests Mr. Draghi is putting a priority on getting Italians back to work.

However, foreign observers and Italians should not assume this government will tackle structural change. Mr. Draghi is far more likely to lead a competent administration. That would not be a small feat, particularly during a pandemic that has made competent public service a rarity – even in the countries more accustomed to it than Italy.

Two questions

Perhaps more interesting than speculating on what the Draghi government might undertake to reform in Italy is taking a look at the challenges that he most certainly will not tackle. Until recently, Italy’s base scenario was that of an ever-growing Italian state. The Conte government had a strong nationalization impulse and the government bank, Cassa Depositi e Prestiti, or CDP, was casting a spreading shadow over the economy. It is not likely that the Draghi cabinet will reverse the policy, but it may merely stop going further in that direction.

Scaling down the government’s interventionist propensities might be enough to foster more confidence in free enterprise. One interesting challenge for Prime Minister Draghi will be the temporary protection of Italian companies from “foreign” buyers, which the Conte government spearheaded. Though Mr. Draghi may not want to upset Lega’s nationalists too much, he could gradually relax the restrictions, restoring the market rules in the country’s property rights system. 

Ascribing to defined political views may not be critical for a high-ranking civil servant, but it is expected of a prime minister.

There are two intriguing questions that the next few months may answer. The prime minister is reserved as a person: he has functioned among Italy’s top officers since 1988, yet no one knows his political views. As an economist, he is considered a moderate Keynesian, of the Larry Summers bent; a technocrat who believes the world can be fine-tuned for the better and also someone who would not wish necessarily to reduce the room for free enterprise. He keeps private his views on immigration, LGBT rights or the place of religion in the public sphere. Known as a Catholic and a member of the Pontifical Academy for Social Sciences who advises the pope on global trends, he claims no particular spot in the matrix of today’s Catholic ideas.

During his consultations with party leaders, he embraced Emma Bonino of the Italian Radicals (currently a senator, she was a European commissioner and a foreign minister) and was friendly with Mr. Berlusconi. This would suggest sympathy for the more liberal corner of the political scene, but hardly anything more than that.

Ascribing to defined political views may not be critical for a high-ranking civil servant, but it is expected of a prime minister – particularly at a time when the most contentious issues tend to be cultural rather than economic. How will Mr. Draghi manage in that field? His preference for keeping a low profile may prove untenable. Mr. Conte continuously engaged in communicating with the Italian public, on TV and through social media. Prime Minister Draghi does not have a Twitter account, and few bank on him opening a one. However, he may soon need to agree to more media interviews to connect with the public.

The Draghi government is likely to mark the end of political adolescence for the two Italian populist parties.

The second question is related to the Italian political landscape. Mr. Salvini’s support for Mr. Draghi has been a game-changer. He is now in the business of building Lega’s image as a responsible party – first of all, in the eyes of other European member states. If Lega stayed out of the coalition, Mr. Salvini would have seemed a constant naysayer. He aims to win the next election and, for the first time, appears ready to tend to his international reputation. 

A picture of Matteo Salvini
Rome, February 17, 2021: Lega’s leader Matteo Salvini arrives at the Italian Senate before the debate ahead of the confidence vote on the new government. His support for Mr. Draghi’s cabinet was a game-changer for the ambitious politician, who is already eyeing the next elections. © Getty Images

This is the watermark for Mr. Salvini’s leadership style, but not for the party that has administered large swathes of northern Italy with no-frills local politicians. For Beppe Grillo and the M5S, however, taking part in Mr. Draghi’s project is likely to come with a price tag: many expect the party to break up, with the most extreme leftists leaving. In short, being in the Draghi government is likely to mark the end of political adolescence for the two Italian populist parties.



Will this permanently change Italy’s political landscape? Can significant developments be triggered by the mere fact that Mr. Draghi is in the game? With his demeanor, he is – culturally even more than politically – the opposite of the sort of top politicians that Italians have voted into office in recent years. When Mr. Salvini was a member of a local council in Milan, a journalist for his party’s newspaper, a member of the European Parliament and then a senator and, for one year, the interior minister, Mr. Draghi sailed smoothly between Italy’s treasury, the Goldman Sachs investment bank, Italy’s and the EU's central banks. The contrast in the two men’s experience could hardly be starker. 

Will, after a Draghi term, Italians happily go back to a Salvini-vs.-Di Maio kind of contest? The only past caretaker government that fed populism was the most unpopular one, that of Mr. Monti. However, after the Ciampi term in office came that of Mr. Berlusconi, then one of the country’s top businessmen, and after Prime Minister Dini was Romano Prodi, a professor who headed IRI, the conglomerate of Italy’s government-owned companies. 

The talent pool of Italy’s political class appears shallow, but in a democracy, if people want better politicians, they need to elect them. Political parties have little incentive to be better headhunters as long as people are happy with what they get. Can the prestige and the example of Mr. Draghi help pump fresh blood into Italy’s tired political veins? That is a good question, too.

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