New Italian Prime Minister Mario Draghi.
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LONDON – The new Italian Prime Minister, Mario Draghi, is already transforming the political landscape in Rome and causing stock markets to skyrocket.
In the wake of a new political chaos, the former president of the European Central Bank was called to become Italy’s new leader and rescue its turbulent economy. His arrival was described as “better than expected” after gathering broad political support and containing the threat from populist forces.
Draghi, who took office on Saturday, presented his cabinet at the weekend – a group made up mainly of politicians from different parties and some technocrats in key ministries as well.
“This is the best possible outcome, and better than I expected, because it provides a degree of stability and political accountability,” said Erik Nielsen, chief economist at UniCredit, in a research note on Sunday.
Draghi won the support of most of Italy’s main political forces, due to concerns that a purely technocratic team would be short-lived. The next general elections in Italy will take place only in the beginning of 2023.
The return of Mario Draghi, now Prime Minister of Italy, changed the political landscape dramatically.
By ensuring broad political support and a diverse team, Draghi has already improved the prospects for Italy. Analysts were more optimistic about the Italian government bonds, citing “expectations of a more efficient use of NGEU (Next Generation EU) funds, structural reforms and a better perspective in terms of vaccination”, according to a note from UniCredit.
At the same time, Italy’s main stock index has risen more than 7% since the beginning of the month.
Barclays analysts believe that economic growth will also increase in the second half of the year. “The return of Mario Draghi, now Prime Minister of Italy, has changed the political landscape dramatically,” Barclays analysts said in a note on Monday.
They explained that the winner of the month-long political crisis appears to be the anti-immigration Lega party. The most centrist PD was previously opposed to joining forces with Lega and this new unity created tensions within the party. Meanwhile, the other major party, the Five Star Movement, saw internal divisions in approving the post of Prime Minister of Draghi last week.
Sleeping population
This could change the picture in Italian opinion polls. Lega is still the most popular political party, with around 24% of public support. However, the Five Star Movement and the PD – which formed the previous government, may face a setback. PD, which had 20% of public support in January, lost a percentage point in a poll released on February 11.
At the same time, Draghi’s arrival has also lessened the rhetoric of populism, at least for now.
“Today what we can say is that populism is weaker in Italy both because of Draghi’s intervention and because of the intervention of the pandemic and European integration,” Lorenzo Castellani, historian at private university LUISS Guido Carli, told CNBC last week.
Italy had two main populist forces after the 2018 general elections – Lega and the Five Star Movement. But both have now taken a less anti-EU stance now, Erik Jones, a professor at Johns Hopkins University, told CNBC on Monday.
“The Five Star Movement pivoted when it supported Ursula von der Leyen (President of the European Commission) in June 2019; Lega did its pivot when it decided to support Draghi in forming an openly pro-European government of national unity last week, “he added.