Italy Ditches Bothersome Politicians, Go to a Technocrat to Spend EU Cash

A decade ago, Italy, in the middle of its worst post-World War II economic crisis, turned to an unelected economic expert to right the country’s sinking, debt-ridden ship.

Draghi in the Middle: The Guys Next to Him Don’t Count

Mario Monti, an economist from the European Union Commission, was named prime minister then, even though he had never run for any office in Italy. With high hopes, the Italian media dubbed him Super Mario, after the videogame.

Just over a year later national elections took place after a political ruckus over Monti’s efforts to reform Italy’s economy. He formed his own political party but won only 8.3% of the votes.

Last week, after a post-Monti series of three inconsequential prime ministers and the dual crises of coronavirus and a flailing economy, Italy again called in an economic expert. This time it’s Mario Draghi, fresh from his eight-year stint as European Central Bank head.

Perhaps illustrating an originality deficit within Italy’s media community, he was also christened Super Mario. It is the fourth time in a quarter-century that Italy has ditched elections or cabinet reshuffles when governments fail and instead put its faith in a technocratic Mr. Fix-It.

There is a key difference in Draghi’s task compared with Monti’s. Monti was tasked with enforcing EU austerity demands so Italy could keep paying off its massive public debt. For Draghi, austerity is no issue.

The coronavirus saw to that. The EU earmarked about 800 billion euros in aid to support virus-battered economies across its 27-nation membership. Italy gets the biggest chunk of the fund, about 210 billion euros.

Under Monti, Italy was meant to curb public spending, increase taxation and suppress wages and pensions. For Draghi, there’s no focus on reducing Italy’s debt, which in the past year has ballooned to about 160% of GDP from around 135%. Neither taxation nor reducing social welfare is high on his to-do list.

In effect, the EU jettisoned its obsession with holding down government deficits in spendthrifts like Italy. Instead, in the face of the pandemic, it embarked on a Keynesian frenzy of spending to stimulate economic growth across the continent.

In Italy’s case, the EU’s main concern is to keep the money from going down the black hole of wasteful mismanagement. Banker Draghi’s appointment – made by the titular head of state, Sergio Mattarella, and approved by the largely discredited parliament – is seen as a guarantee of that.

Draghi has laid out programs designed to meet EU guidelines for handing over the money. One is to invest in forward-looking projects to reduce fossil fuel use and encourage digitalization, in a transition to the EU’s self-declared Green Economy.

Somewhat vaguely, he has promised to streamline Italy’s slow-motion judicial system as well as reform the country’s huge and tangled bureaucracy. Italy’s state administration employs 3.2 million people, or 14% of the country’s labor force.

Other than that, Draghi just has to make sure the money is accounted for. Yet there are pitfalls in the way of stimulus.

Success in getting Italy out of the economic doldrums will depend on controlling the pandemic. Draghi promised to accelerate the rate of vaccinations, but supply is insufficient, as it is all across Europe (the EU failed to buy enough doses).

Italian health officials are already talking about a third surge of contagions next month and a new set of restrictive lockdowns.

Slow-paced decision-making is a problem in the EU. The EU Commission must sign off on each country’s spending plans. By some estimates, approvals may not come until this summer and much of the money may not flow until next year.

Moreover, Draghi will have to decide next month whether to extend a program that has blocked companies from firing workers in return for government aid. The extension would represent a continued drain on Italy’s shallow coffers.

Then there is the question of where the EU money should go. Pressure is already building to quickly shore up unprofitable industries, steel-making and the national flagship airline, for example, and to buttress hard-hit traditional stalwarts of the economy, tourism and agriculture.

Passing money to distressed old businesses would run counter to the EU’s goal of creating a high-tech economy of the future.

So even with 200 billion euros to play with, Draghi’s is a high-wire act. And he doesn’t have an eternity to show progress in his dual task of curbing the pandemic and boosting the economy.

The recent history of appointing a so-called technocrat as prime minister started in 1993, when Carlo Azeglio Ciampi was named in the wake of corruption scandals that upended the dominant parties of Italy’s post-World War II years.

In 1995, Lamberto Dini replaced Silvio Berlusconi, the media magnate who was elected in 1994 then lost power quickly amid more scandals and a deep economic crisis. In 2011, Mario Monti was called in during the global economic downturn that saw Italy’s GDP decline by about 10%. And now Draghi.

The four technocrats have two things in common. Each was an unelected economist: Ciampi headed Italy’s central bank for many years; Dini was an official from the International Monetary Fund; Monti came from the EU Commission; and now we have Draghi, who before going to the ECB headed the Bank of Italy.

All were tapped by Italy’s president of the republic, the titular head of state who is elected every seven years by a vote of parliament and regional representatives. Formally, the president’s role is primarily to defend Italy’s constitution and to head the armed forces.

However, the presidency has evolved into the go-to political kingmaker during political calamities.

The message: when the going gets tough, don’t let the voters go to politicians to fix it. Go to the unelected economists.

The record hasn’t been very good. The first three technocrats failed to reform Italy’s ailing and stagnant economy. But unlike them, Draghi has the advantage of free EU money to work with and a country hungry for success. It will help if the pandemic recedes quickly.

Homework: A history of technocratic governments in Europe. https://core.ac.uk/download/pdf/46520118.pdf

Also in Asia Times. https://asiatimes.com/2021/02/italys-pols-a-bother-technocrat-to-spend-eu-cash/

 

Daniel Williams

Published by Daniel Williams

I am a former correspondent who, for more than 30 years, did time in China, Southeast Asia, Central America, Mexico, the Middle East, Europe and Africa and covered wars that went from episodic to non-stop. My book, "Forsaken," about Christian persecution in the Middle East came out January, 2016. NextWarNotes is a news and analysis blog designed to fill gaps, provide background and think about what’s next. The name of the site comes from a 1935 article by Ernest Hemingway in Esquire Magazine called “Notes on the Next War,” in which he predicted the coming conflagration in Europe, told why it would happen and warned Americans to stay out.

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