Chris Bambery

Chris Bambery

Draghi and the Looming Italian Disaster

Reading Time: 4 minutes

The appointment of a ruling class manager over the Italian crisis has implications for the whole of Europe. Chris Bambery argues we should all be paying close attention.

The Italian state is heading deeper into a painful economic crisis, with a banker’s banker appointed the new prime minister, despite never having been elected.

Mario Draghi’s appointment by the Italian President came after talks on 2 February broke down over rebuilding the disparate coalition government led by Giuseppe Conte, which collapsed last month. This followed it losing its majority in the Italian Senate after the resignation of a small party led by former prime minister Matteo Renzi, who attacked the government’s handling of the pandemic and economic recovery spending plans. Renzi previously headed the left of centre Democrats and is a former premier totally loyal to whatever the European Union demands.

The main components of Conte’s Coalition were 5 Star (M5S) and the Democrats. M5S was previously in government with the right wing, anti-immigrant Lega, led by Matteo Salvini.

In the 2018 general election M5S was the biggest party with the Lega in second place. They capitalised on the alienation of young Italians in particular from a self-seeking political elite which had failed them. The Italian economy has been stagnant for two decades. It’s membership of the Eurozone has been one long ordeal. Italy went through harsh years of austerity after the 2008 financial crash and the subsequent recession, with persistently high youth unemployment, especially in the South, where jobs are scarce and precarious. Late last year in Calabria, Sicily, and Campania in the South of Italy, the shares of citizens without a job ranged from 15.6% to 19.2%. These figures are much higher among the young. Though M5S reflected anger at this state of affairs, it was not of the left.

The Lega, once the Lega Nord, blamed immigrants for all ills and, to a lesser extent, the EU. In September 2019 Salvini, seeing the Lega riding high in the polls and M5S in disarray, split from the coalition government to provoke elections. His gamble did not succeed and M5S joined Conte’s new coalition to applause from Brussels who feared Salvini might actually deliver on his anti-EU rhetoric (even though he has no record of actually pursuing a rupture from the bloc).

M5S looks prepared to support the new Draghi government, showing how far it’s come from its anti-establishment posture. Draghi is the choice of the EU, the European Central Bank (ECB), the German government and, in last place, the Italian elite.

A former academic, Draghi has worked for the World Bank, and the Italian treasury before a top job in the private sector with Goldman Sachs in 2001. After four years there, he became governor of the Bank of Italy before being appointed head of the ECB. It’s a CV which marks him out as very much a man of Europe’s ruling elites.

The Financial Times welcomed Draghi’s appointment thus: “As European Central Bank president from 2011 to 2019, Mario Draghi played a decisive part in saving Europe’s currency union from a near-fatal sovereign debt and banking emergency.”

Setting aside the politico-speak, the FT is applauding Draghi for being one of the key architects of austerity which blighted southern Europe, the calvary of Greece and the ongoing pain of Spain, Italy and Greece, which maintain shocking levels of youth unemployment and stagnant economies.

The same FT article purrs over Draghi’s appointment: “His authority and expertise will reassure financial markets, Italy’s business community and much of the general public that a steady hand is guiding the ship.

“He will seek to redesign Italy’s recovery plan in such a way as to win approval from the European Commission, which has oversight of how EU governments will spend their shares of the [Covid 19 recovery] fund. This will be no small matter, since Italy is supposed to receive roughly €200bn, or 10 per cent of gross domestic product, in grants and loans over five years — the largest sum in absolute terms for any EU country.”

What that means is Draghi will follow the policies advocated by the unelected European Commission and the unelected ECB (and behind it the German Federal Bank) in reducing public spending, fresh labour ‘reforms’ and increasing productivity.

He will also do nothing to rescue Italy’s ailing banks because Germany has proscribed any such action, although the dogs on the streets of Milan and Rome know they will waste no time in rescuing ailing Deutsche Bank.

Draghi’s problem is that we have been here before. Back in 2011 the European Commission imposed an unelected, technocratic government headed by Mario Monti, a former EU commissioner, who became prime minister at the height of the Eurozone’s crisis. But Monti had no support base in wider Italian society nor in parliament and could not survive various political manoeuvres once the established Italian politicians and parties had recovered breath.

Elections are upcoming and currently the Lega and the even more right wing Fratelli d’Italia (Brothers of Italy), which includes naked fascists, are vying for top place in the polls. They will be licking their lips in the credible belief this new appointment will simply deepen discontent with Italy’s venal political class.

Underlying all this are very deep economic and social problems. Since 2008 Italy’s banks have been stuffed full of bad debt. The problem has not gone away and has gotten worse during the Pandemic, as has Italy’s stagnant economy. The ECB ruled-out any bank rescue package, at the behest of the Merkel government in Berlin. Unless it reverses its attitude Italy could go the way of Greece a decade ago. But Italy is much bigger than Greece, the Eurozone’s third biggest economy.

Meanwhile discontent with the EU is palpable. Italians, including those sympathetic to migrants, feel the EU has left them to carry the burden of those who succeed in crossing the Mediterranean. They vividly remember France and Austria closing their borders.

You will recall Italy was the first European country to be affected by the Pandemic and Italians remember too that Germany and the EU refused appeals for financial help to combat Covid.

Where is the left in all this? Well, the answer is nowhere. It hasn’t recovered from the suicide of the once influential Rifondazione Communista a decade and a half ago. The anti-capitalist party entered coalition with the neo-liberal centre left, reneged on its promises and was crucified at the polls. Italy and all of Europe still live with consequences.

This does not mean there is no space for socialist politics. Left-wing protests still flare up but then recede in the absence of more permanent organisation. A left which can articulate a popular hostility to the Italian ruling elite and the EU’s class technocracy, remains badly needed.

The looming debt crisis, and its threat to the stability of the entire Eurozone also calls upon the international attention of the socialist left. In the face of such vicious anti-working class economic and social policies, and a pure contempt for democracy, continuing to ignore the mess of the EU is not an option.

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