Here Is Mario Draghi Again, or How the Money Will Flow in Italy

In Italy, ministerial instability is chronic: the second government of Giuseppe Conte fell on January 26 after the departure of a small party (Italia Viva of former head of government Matteo Renzi), with the two large formations of the coalition (the Democratic Party and the Five Stars Movement) not having a majority on their own. And who do we see reappearing, with every chance of becoming President of the Council: Mario Draghi! He was received on February 2nd by the President of the Republic Sergio Mattarella to form a new government.

The former president of the European Central Bank (2011-2019), and of the Bank of Italy (2006-2011), is returning to the center of his country's political life. It is true that the time is serious, the GDP of the peninsula has fallen by 8.9% in 2020, and to revive its economy, Rome is counting on an aid plan of 200 billion euros financed by the European Recovery Plan. But precisely, the political crisis casts doubt on the country's ability to implement it. That's when the "savior" Mario Draghi appears.

The transalpine press is ecstatic to welcome the one who is presented as the savior of the eurozone in 2012, during the European debt crisis (Greece, Ireland, Portugal, Cyprus). A rescue, let's recall, which essentially consisted of pouring debt (but with a longer maturity) on these countries, in order to save the big European banks, but Greece is still fundamentally insolvent, in short. "Super Mario faces a new challenge: to save Italy after having saved Europe," proudly states Il Messaggero, for whom the former head of the ECB is the "last resort" when nothing else has worked to get out of the politician's swamp.

And Draghi's "plan" is debt, again and always. For Corriere della Sera, Mario Draghi will be the man of "whatever it takes", as he was during the debt crisis in Europe in 2012. This formula, taken up in France by Emmanuel Macron, will therefore find its application in Italy. As Il Fatto Quotidiano astutely notes: "Financing the economic rescue with government guaranteed loans is reassuring for the banking and market circles from which Draghi comes. A credo that he stated as early as last May in an interview with the Financial Times ... in the form of a government program before its time". What a clever guy, Mario.

It is therefore spending at all costs that will be necessary in Italy, less to revive the economy (the aid plans have a limited real effect) than to save a very fragile banking system. Christine Lagarde won't find anything to complain about, so we can be sure that the ECB's printing press will continue to run at full speed. The balance sheet of the European Central Bank has just exceeded 7 trillion euros, which now represents nearly 70,5% of the GDP of the eurozone countries. An insane figure, double that of the Fed (34,5%), but there is still room for improvement when compared to Japan (132%). Nothing to worry about, says the president of the European monetary institution, who forgets that the archipelago functions differently (the debt is held 100% internally, which allows a restructuring without external consequences).

Mario Draghi's choice embodies this headlong rush, that of a government that avoids structural reform in order to improve its competitiveness and prefers, on the contrary, to explode its deficit, but does not worry about it at all since the Central Bank buys back all the debt issued by the Treasury (the two institutions merge in a way), as has been the case since the Covid crisis. The return of Mario Draghi is undoubtedly good news, at least in the medium term, for Italy, but undoubtedly very bad news for the euro, which continues its freewheeling course, with the associated risks of devaluation and inflation.