The endemic instability built into Italy’s multiparty political system has again prevailed. The technocrat prime minister, Mario Draghi, resigned after his fractious coalition imploded.
Draghi’s coalition was a paradox as the pro-EU former president of the European Central Bank had to depend on the support of the most Eurosceptic parliament in Italy’s history.
The timing of the collapse of the Draghi coalition came at the worst possible time, not just for Italy but more so for the eurozone and the entire European Union.
Italy, the third largest economy in the Union, is still struggling to recover from the COVID economic disruption. It is also burdened by substantial debt and prohibitive borrowing costs. Financial markets are again fretting about a future Italian political government implementing the necessary structural reforms to improve the country’s finances.
Financial markets are again showing serious doubts on whether a new Italian government will maintain the reform effort of Draghi.
Despite the general support and admiration that many Italians have for Draghi, the populist factions of the right and the left in the Italian political spectrum decided that an early election could best serve their narrow political interests. Elections are likely to be held in late September or early October. The weeks leading to these elections could see further economic turmoil in Italy and the EU worsening at a time when high inflation is depressing many households.
Draghi’s resignation also comes during a period when two other foremost EU leaders are facing severe problems in their own countries.
French President Emanuel Macron does not have a parliamentary majority and is considered a lame duck president by many observers.
German Chancellor Olaf Scholz is struggling to wean his country off its dependence on Russian oil and gas while the economy stutters. These political shocks do not augur well for the consolidation of the EU.
At a time when the EU is launching a historic and innovative recovery plan financed by common debt, more instability in Italy could scupper the hoped-for benefits of this massive investment. Draghi had placed his hopes of a renovation of the Italian economy on the productive investment of some €200 billion that the EU promised to Italy as part of the post-pandemic plan.
Draghi warned Italian politicians that Italy needed to meet 55 economic and administrative reform targets before the end of this year to receive the next EU tranche of €19 billion. Many observers understandably doubt whether the next Italian coalition will have the political will and the competence to carry out the necessary reforms in such a short time.
If current opinion polls prove correct, the next Italian government will be a right-wing coalition comprising Fratelli d’Italia, La Lega and Forza Italia. Such a coalition is likely to tone down Draghi’s resolve to penalise Russia for its invasion of Ukraine. Both Silvio Berlusconi of Forza Italia and Matteo Salvini of La Lega are known to be sympathisers of the Russian president Vladimir Putin. This is not good news for the unity that the EU and NATO needs to fight Putin’s aspirations of hegemony.
Europe has not suffered from such grave political and economic instability since World War II.
It remains to be seen whether the pro-European Italians will rally behind the political parties that can guarantee that the current turmoil does not evolve into an even worse nightmare scenario.