Prime Minister Mario Draghi announced his departure last week after haggling with coalition party Five Star Movement. Because President Mattarella does not accept his resignation, Italians are in great uncertainty. Today and tomorrow Draghi will speak to the senate and parliament, and it will become clear whether and under what conditions he will remain in office.
In any case, it is a political crisis that does not sound un-Italian. “But it will come at the worst possible moment,” says correspondent Anouk Boone.
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Italy is also in a severe economic crisis. There is a lot of unemployment, sky-high inflation and a huge government debt. “It’s the result of decades of mismanagement,” Boone says. “And then the corona crisis came on top of that. It has made a big cut here.”
Since taking office in 2021, Prime Minister Draghi has seemed to be bringing calm to the economy. After saving the euro from collapse as president of the European Central Bank in 2012, he is now expected to do the same for Italy.
Budget not round
But a good budget for next year is essential for that. It should be presented to parliament in October, after which negotiations can begin. Parliament must agree before the end of the year.
A political crisis threatens that. If Draghi continues with a feuding coalition, it will be difficult to reach an agreement. If there are new elections, it will be even more difficult. “They then take place when you should actually already be working on that budget,” says Boone. “Then see if you can finish it in time.”
Corona billions in danger
Meanwhile, there are also a lot of corona billions at stake for Italy. To absorb the blow of the corona crisis, Italy can count on a considerable amount of money from the European Union’s corona recovery fund. About 200 billion euros of the 750 billion in the pot will go to the Italians.
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But there are strict conditions attached to it. For example, the Italian justice system must be reformed and the Italians must invest more in green energy. Prime Minister Draghi immediately started working on this. He built a team of ministers around him that could achieve exactly those objectives.
Coalition rumblings or new elections could also put those billions at risk. The Five Star Movement has already blocked major reform plans. And in new elections, a right-wing populist party could just win.
‘Brussels can turn off the money tap’
“They are now doing well in the polls,” says Boone. “The Five Star Movement may not, but parties such as Fratelli d’Italia and Forza Italia do. That is the party of Silvio Berlusconi.”
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While Draghi focused on more European cooperation, those parties traditionally turn more away from the European Union. They are also known for not taking European regulations very closely. “If Italy does not comply with the conditions for EU money, Brussels can turn off the money tap,” says Boone.
In that case, Italy will miss out on much-needed billions. If the budget does not come through, the country could just go bankrupt. “Italy can collapse like a house of cards.”
Greece scenario
In Brussels, developments are being watched anxiously. The days in Italy are also very exciting for the rest of Europe. “Italy risks a crisis for all of Europe,” Boone explains. “You have to realize that Italy is the third largest economy in the European Union.”
Because Italy uses the euro as a means of payment, it can take the currency with it in its fall. “If the Italian economy goes down, a kind of Greece scenario threatens. A new euro crisis could arise.”
That’s the worst-case scenario, and it’s not there yet. “It’s hard to predict what’s going to happen,” Boone says. “It is not even certain that Draghi will leave. There has been such a big appeal to him in recent days. A lot of people want him to stay, from left to right. The question is whether he can resist that wish.”
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