On February 13, former European Central Bank (ECB) Governor Mario Draghi was sworn in as Italy’s new prime minister. Draghi was tasked with forming a unity government following the collapse of the previous administration last month.
The newly formed government has the backing of a vast cross-section of the Italian parliament, with the far-right Brothers of Italy being the only parliamentary opposition.
The post-ideological populists of the Five Star Movement and the far-right League, both historically known for their eurosceptic positions, are part of the ruling coalition alongside the centre-left Democratic Party, left-wing Free and Equal, centre-right Forza Italia, and several other small parties.
Draghi also benefits from high approval ratings among Italians, and Europe’s political leaders have wholeheartedly welcomed his government.
This is not a new phenomenon. Technocrat Mario Monti was also greeted with similar sentiments when he led an unelected cabinet in 2011, following the resignation of disgraced Prime Minister Silvio Berlusconi.
But within months of assuming office, Monti became the target of vitriolic attacks from populist parties and his popularity crashed. The Italian public’s dissatisfaction with Monti’s brand of technocratic politics grew over the years and eventually resulted in the Five Star Movement and the League’s shocking election victory, and short-lived coalition government, in 2018.
Draghi undoubtedly belongs to the same technocratic class as Monti – a class that has shaped Italian and European economic policies for many decades. But this does not mean their political fates will be the same, as Draghi’s governmental agenda is markedly different from Monti’s.
In line with European Union consensus at the time, Monti pursued austerity and fiscal discipline, which made an already stagnating Italian economy worse, while public debt continued to increase.
Draghi, on the other hand, appears to be heralding a new page in European economic and social policy that marks a move away from the neoliberal orthodoxy.
Draghi’s ambitious plans
Draghi’s unity government is tasked with designing and implementing the biggest economic recovery plan Italy has seen since the end of World War II.
Italy will receive, from Europe’s coronavirus recovery fund Next Generation EU, around 210 billion euros ($254bn) in grants and loans to be spent between 2021 and 2026 on sustainable development, digitalisation, infrastructure projects and health, on condition that reforms are carried out to improve bureaucracy, the justice system and taxation. Like all other member states, Italy is required to submit its recovery and resilience plans to the European Commission (EC) by the end of April 2021 to be able to access the funds.
Following in the footsteps of the previous government, Draghi has made it clear that he will not pursue fiscal discipline and budget cuts in the middle of a pandemic. He plans to maintain and strengthen welfare measures to help workers keep their jobs or move to more viable sectors, and to mitigate growing poverty and inequality. The new government will also use the recovery fund to produce economic growth and new jobs in the areas prioritised by the EU.
Draghi already has a track record of going against the neoliberal consensus. In 2015, under his leadership, the ECB started buying large quantities of state bonds and other financial assets from eurozone countries to inject money into their economies in order to boost consumption and thus increase job creation and economic growth.
Now, as Italy’s prime minister, he is stressing that there is a need for more, not less, European integration, and that the EU should be there to help member states in economic distress, rather than impose rigid rules on them that further stifle economic growth and increase inequalities.
Draghi is no socialist, and his programme shows that he is a strong believer in market competition. He thinks state incentives and financial support should be offered only to companies that are economically viable, and others that are not should be left to their own devices. But he also stated clearly that he believes workers should be protected, and he is known to be an advocate of full employment policies. His economic plans for Italy mark a significant return to Keynesian policies after three decades of austerity and market deregulation.
European leaders know that the EU faces an existential threat and needs to build a fresh consensus. The recovery fund is made out of a mix of grants and loans, and the financing comes from public debt that is collectively shared by all EU countries. This is a significant reversal from the policies of the European troika (the EC, the ECB and the International Monetary Fund) that brought Greece to its knees in the early 2010s, and has kept the economies of highly indebted southern European countries under the tutelage of European financial institutions. Draghi appears to be hoping to push this change in policy even further, and envisioning Italy at the helm of a new Europe united in solidarity.
There are, however, several obstacles in the way of Draghi’s grand plans for Italy.
The anti-immigration popular consensus in Italy, brought about by years of populist campaigns, continues to hold.
Italy’s and Europe’s anti-immigration policies have brought death and suffering to thousands of migrants and refugees over the years. And these measures are not only immoral and in violation of basic human rights, but also economically short-sighted.
Given Italy’s demographic decline and ageing population, the country needs migrants to sustain its economy and a healthy tax base. The structural changes that Draghi hopes to implement need innovation, and innovation thrives with the free movement of people and ideas. So far, the new prime minister has signalled that he will not veer away from the current consensus and called for EU-wide policy efforts on the issue of repatriation of undocumented migrants.
Another challenge facing Draghi is the country’s north-south divide. To deal with its chronic underdevelopment, southern Italy needs not only extensive welfare measures, but also increased investment. However, there is a danger that the north will continue to be the primary recipient of state investment under the new government. League ministers in Draghi’s cabinet will no doubt do everything they can to favour their core base of voters in the north, who have always been hostile to southern demands for fairness and redistribution.
The return of politics
The Draghi-led unity government will likely succeed in keeping Italy afloat until the end of this crisis and kick-starting a post-pandemic recovery. But this emergency government will not last beyond mid-2023, when the term of the legislature comes to an end and fresh elections are due. In such a short period, and without a direct mandate from voters, Draghi’s cabinet cannot create the political consensus required to support long-term sustainable and equitable economic development.
What Italy needs is a broad coalition of internationalist progressive and centrist forces with a clear vision for the country’s future and a feasible plan of action, that rejects anti-immigration policies and sets equality in its multiple dimensions as a key policy goal.
Populist and far-right forces will be quick to exploit the cracks that will likely emerge in the ruling coalition in the coming months, but at the moment they are fraught with internal divisions and have been significantly weakened by the loss of geopolitical power marked by United States President Joe Biden’s arrival in the White House.
Draghi’s government gives some time to progressive forces to recoup and strategise ahead of the next elections. The window of opportunity is small. Progressive politicians should make the best of it.
The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.
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