Mario Draghi in the government in Italy: what to remember? – EconomyMorning



The case is not yet closed but it could very soon be the case: the entry into play of Mario Draghi as President of the Council of Ministers of Italy. How to interpret the arrival of this former central banker in the field of executive power? Let’s start if you don’t mind by diving for a few moments into the Italian political context. Draghi at the helm of Italy: a majority formed by the end of the week? On February 3, the President of the Italian Republic Sergio Mattarella (Christian Democrat), instructed Mario Draghi to form a government to succeed Giuseppe Conte (independent but close to the 5 Star Movement – M5S). The second Conte government, formed last September as part of an agreement between the M5S and the Democratic Party (PD), has indeed lost its absolute majority following the resignation on January 13 of two ministers belonging to Matteo’s new movement. Renzi (ex-PD), Italia Viva, due to a disagreement over the implementation of the European recovery plan. After winning the confidence of the Chamber of Deputies and the Senate, Conte nevertheless failed on February 2 to form a new coalition, hence President Mattarella’s call for a new man: Mario Draghi. The appointment of this 73-year-old former central banker as President of the Council of Ministers remains of course dependent on the formation of a majority in order to gain the confidence of the Italian Parliament. Last week, Mario Draghi met with representatives of the political forces present and, according to the latest news, “the ex-president of the ECB on Saturday obtained the support of the League and the 5 Star Movement”, as L’AGEFI reported on Monday morning. Another surprise: a priori, Matteo Salvini’s Northern League would not oppose the appointment of Draghi. A second round table has started this week but, after initially having aroused the frontal opposition of the M5S, the idea of ​​a Draghi government could therefore soon see the light of day. If the latter does not gain the confidence of Parliament, Sergio Mattarella should then consider early parliamentary elections, and this is precisely what he wants to avoid through his appeal to Mario Draghi. Italy waiting for a savior It is true that the Italian peninsula is not at its best. In 2020, economic activity fell by 8.9%, making it one of the worst performers in the Eurozone. As if that were not enough, the 2021 rebound is expected to be lower than that of its neighbors, with Rome only counting on 3.5% growth this year Italy is therefore impatiently waiting to be able to use the € 222bn of the Plan of European revival which are incumbent on it. However, the differences between the parties question the country’s ability to exploit this windfall to boost its growth. As Les Echos reported in December, “the country has [] still not defined its priorities and chosen the projects for which these resources will be intended “, and this even though Italy is one of the biggest beneficiaries of this plan sadly called” Next Generation EU “. The traditional political personnel having failed, it was time, according to President Mattarella, to call on a technocrat. And this is where Super-Mario comes in, all crowned with his crown of “savior of the euro zone” (a balloon that I have already deflated As Les Echos recall, “his name was often referred to as lsquo; the most eminent reserve of the Italian republic ‘and as a potential lsquo; savior of the homeland.” “The’ savior of the homeland ‘or the defender the more ardent in the headlong rush into debt? We no longer present Mario Draghi. I refer new readers to the assessment that I had drawn up of his action at the head of the ECB (see here and there), a post that he had accepted after having been governor of the Bank of Italy. tion would obviously be seen as reassuring for the markets since the Italian is perceived both as a determined figure, at ease in crisis management situations, never stingy when it comes to spending public money. , and especially not the type to repudiate public debts. The former central banker had barely started his first round of consultations with a view to forming a majority when the rate spread between the 10-year Italian and the Bund touched a five-year low. February 4: “The Super Mario effect is working: Italy’s rate spread vis-à-vis Germany falls below 100 basis points for the first time since 2016. Investors are betting that the former governor of the ECB, Mario Draghi, will be able to form a government to handle the coronavirus crisis and the funds coming from the EU. “What policy is Mario Draghi likely to lead? Since leaving his place to Christine Lagarde on October 31, 2019, the former central banker has stood out with a few statements, in particular with this op-ed published in the Financial Times on March 25. “Draghi: we are at war with the coronavirus and we must mobilize accordingly” Attention dear reader: “Mobilize accordingly”, this does not mean carrying out structural reforms to improve the country’s competitiveness, it rather means this: “The key question is not whether the state should use its balance sheet wisely, but how. [] Much higher levels of public debt will become a permanent feature of our economies and will be accompanied by cancellation of private debt. “And Mario Draghi to invoke the favorite argument of frenzied statists:” We must also remember that given the current and likely future levels of interest rates, such an increase in public debt will not increase costs. of his service. “In short, as Philippe Herlin writes,” it is therefore all-out spending that will prevail in Italy, less to revive the economy (aid plans have a real limited effect) than to save an economy. banking system very weak “. All this of course to the delight of Christine Lagarde, who continues to proclaim that governments must take over from monetary policy. Janet Yellen at the US Treasury, Mario Draghi as President of the Italian Council When will Jean-Claude Trichet return? At the time of writing, we cannot yet be certain that Mario Draghi will be the next President of the Italian Council. What is certain, however, is that all signs show that fiscal policy continues, slowly but surely, to merge with monetary policy. On the ZeroHedge site, February 6: “Everyone salute the conquering central bankers, or else” So repeat with me: “Hooray for central bankers, and long live the Theori modern monetary policy! “For more information and advice like this, it’s here and it’s free

Design by NewsLax