Mario Draghi Saved the Euro. Can He Now Save Italy?


ROME — In the dark days of Europe’s financial crisis, Mario Draghi, then the head of the European Central Bank, famously said he would do “whatever it takes” to save the euro.

Now, nearly a decade later, Mr. Draghi’s native Italy, facing a catastrophic Covid-19 pandemic, looming economic disaster and a political crisis that has spotlighted the paralysis of its political class, has turned to Mr. Draghi, a titan of Europe who carries the sobriquet Super Mario, as the one who had what it took to save the country.

The pro-European forces in the country have all but described Mr. Draghi’s formal acceptance this week of a mandate from Italy’s president to form a new unity government as manna from heaven. But Italy first has to accept it.

Mr. Draghi, a quiet, polished and enigmatic 73-year-old economist, made important progress on Thursday toward winning support from a disparate array of Italian political parties, including the populists who for years railed against the European establishment that he embodies.

“To overcome the pandemic, to complete the vaccine campaign, to offer answers to the daily problems of the citizens, to relaunch the country are the challenges we face,” Mr. Draghi said in his remarks to the nation Wednesday.

Italy is in perhaps its most perilous time since World War II, as it faces a multifront battle on health, the economy and deep social paralysis and frustration. The country is set to receive more than 200 billion euros, or about $240 billion, in relief funds from Europe — a veritable Marshall Plan for its future — and doubts about the outgoing government’s ability to properly absorb and spend the money helped trigger its collapse.

Mr. Draghi is by contrast seen as uniquely capable of handling such sums. His stewardship, following years of tumultuous leadership by Prime Minister Giuseppe Conte, a previously unknown and ideologically incoherent lawyer who took direction from nationalists, populists and the center-left establishment, would immediately increase the country’s international stature, credibility and clout in Brussels.

Besides having worked closely with Angela Merkel, the chancellor of Germany, and having a possibly more sophisticated understanding of economics than any other head of state on the planet, Mr. Draghi also has a strong line into the White House through Janet Yellen, the new U.S. Treasury secretary, whom he knows well from their years as central bankers. Even the prospect of his leading Italy gave confidence to financial markets, which is in itself crucial for Italy and its long-term growth, as it needs to be able to borrow money at low interest rates.

All of this exuberance surrounds a man who is, himself, famously cautious. He was born into a middle-class family: His father worked at the Bank of Italy and his mother was a chemist. Both died when he was a teenager.

He received a Jesuit education, which some friends consider the root of his studied inscrutability. He has never endorsed an Italian political party and friends say that while he is ambitious, he is not a fan of putting his name even to initiatives he supports. He graduated from Sapienza University in Rome and studied Keynesian economics at M.I.T., ultimately becoming the first Italian to receive a doctorate there.

Gianfranco Pasquino, a prominent Italian political scientist who in 1974 was lecturing at Harvard, played soccer with Mr. Draghi in Cambridge and recalled him as a “serious person” who was “more in listening and less in talking. He was not particularly interested in Italian politics.”

He was also frightfully slow on the field, and was usually one of the last choices as the Italians divided up teams. But it didn’t seem to bother him, Mr. Pasquino said, because he knew their bench wasn’t deep and so he was “an indispensable player.”

Mr. Draghi is being treated like a meteor landing in the middle of Rome. But he knows the city, and its politics, well.

He was the top civil servant at the Italian Treasury for a decade beginning in 1991, providing stability amid the perennial political turmoil.

Those years at the Treasury were good preparation, said Alessandro Merli, who followed Mr. Draghi’s career for years as a financial journalist and is now associate fellow at Johns Hopkins University’s School of Advanced International Studies in Bologna.

“He’s a technocrat but he’s very attuned to political sensitivities,” Mr. Merli said. “He’s shown that he can be extremely efficient and cool under pressure.”

Mr. Draghi’s Rolodex and reputation attracted the U.S. investment bank Goldman Sachs, which made him vice-chairman and managing director in 2002. The center-left prime minister at the time, Romano Prodi, courted him as a potential finance minister. But in 2006, he instead became governor of the Bank of Italy, where his father had worked, again righting the ship after another crisis, this one a conflict-of-interest scandal involving his predecessor.

He stayed there until being named president of the European Central Bank in 2011, in the midst of a sovereign debt crisis. Despite his reputation, his appointment prompted skepticism, largely based on Italian stereotypes.

“Mamma Mia!” read a headline in Germany’s Bild tabloid. “For Italians, inflation is a way of life, like tomato sauce with spaghetti.”

Mr. Draghi’s performance instead became a source of Italian national pride.

As Europe’s top central banker, he displayed a talent for politics by getting most European leaders to support, or at least tolerate, a money printing program that was in many ways more daring than anything undertaken by the Federal Reserve.

Even Ms. Merkel backed Mr. Draghi, despite howls from many in her party that the central bank’s policies would lead to inflation. They did not.

Mr. Draghi could also play hardball. At the European Central Bank, some members of the Governing Council, which includes the central-bank chiefs of the 19 countries in the eurozone, complained that he had a tendency to signal policy moves publicly before consulting with council members, essentially forcing them to go along or risk provoking turmoil in financial markets.

As central bank president, Mr. Draghi pushed for changes including the loosening up of labor market regulations and streamlining of bureaucracy that, especially in Italy, would have required less reliance on the bank. That largely didn’t come to pass.

Lorenzo Codogno, a former chief economist at the Italian Treasury, said that if Mr. Draghi succeeded in forming a government, he would not be likely to take on those issues immediately. His focus would be on the vaccine rollout and managing more than €200 billion, what Mr. Draghi called on Wednesday “the extraordinary resources of the European Union.”

Unlike Mario Monti, another economist brought in as a technocratic prime minister to bail out Italy’s politicians during the debt crisis, Mr. Draghi has the task of spending, rather than cutting, billions of euros.

In a speech in Rimini last year, Mr. Draghi, whose name has been mentioned for years as a potential candidate to replace President Sergio Mattarella as head of state in 2022, said foreign investors would accept higher Italian debt if the country invested money in “human capital, in crucial infrastructure for production, in research.”

Supporters of Mr. Draghi are optimistic that he will get Italy’s paralyzed public works projects moving, that he will invest more in job-creation and education.

“Italy is a country that has a lot of money to spend. We could have thrown it all away, we would have risked spending it badly,” Matteo Renzi, the former prime minister, said in an interview. It was Mr. Renzi who triggered the collapse of the previous government by pulling his support, and exacting some revenge, on Mr. Conte and his supporters in Five Star.

Instead, he said, “Mario Draghi in Italy means trust, and this is the first rule of the economy.” He added, “Now with Draghi we are traveling with safety belts.”

But before Italy’s journey with Mr. Draghi can begin, he first has to get through the gantlet of Italian politics and convince the populist forces that disdain technocrats like him that a broad, unity government is in the interest of the nation.

The anti-establishment Five Star Movement, which, despite hemorrhaging public support, is still the largest party in Parliament, came to power demonizing international bankers like Mr. Draghi. But it also fears the early elections that would result from his rejection, and which would decimate its ranks.

The gravity of Mr. Draghi’s pull, though, has already had an effect. On Thursday, Luigi Di Maio, a party leader, signaled Five Star’s willingness to at least listen to Mr. Draghi.

The League party of Matteo Salvini is split between the pro-business northerners who are excited about Mr. Draghi’s potential to improve the economy, and the members attracted by Mr. Salvini’s Brussels-bashing demagogy over recent years. Mr. Salvini has slipped lately in the polls, but he would still jump at the chance to go to elections. His support of Mr. Draghi would instead signal moderation and perhaps a new political identity.

But to survive a confidence vote in Parliament, Mr. Draghi will also have to endure, and manage, the knife fights among his supporters as they seek positions in what is likely to be a cabinet comprised at least in part of political forces. And Mr. Renzi has already shown that support in Italian politics can be fleeting.

“I hope Mario knows that there are too many sharks in Italian politics,” Mr. Pasquino, emeritus professor of political science at the University of Bologna, said. “Even the small sharks can produce a very deep bite.”

Jason Horowitz reported from Rome, and Jack Ewing from Frankfurt.



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