Essay

Mario Draghi Doesn’t Have ‘Whatever It Takes’ Anymore

Whether as Italy’s prime minister or its president, he may not have the solution to Italy’s problems.

Mario Mario Draghi speaks at a press conference in Frankfurt.
Mario Mario Draghi speaks at a press conference in Frankfurt.
Mario Draghi speaks at a press conference following a meeting of the Governing Council of the European Central Bank in Frankfurt, Germany, in November 2013. DANIEL ROLAND/AFP via Getty Images
Tooze-Adam-foreign-policy-columnist16
Adam Tooze
By , a columnist at Foreign Policy and director of the European Institute at Columbia University.

On Jan. 24, Italy’s parliamentarians and a caucus of regional representatives will start the process of electing a new president. What is normally an arcane domestic political game is attracting attention around the world because the race will most likely feature Mario Draghi—current Italian prime minister and former European Central Bank (ECB) boss whose famous slogan to do “whatever it takes” led the charge in saving the euro.

Today, the mood in the eurozone is calm. But Italy’s debts hang over the future of the euro as a currency. When he was first selected as prime minister nearly one year ago, many hoped that Draghi would perform the same type of transformation in Rome that he managed from his seat in Frankfurt, Germany, at the ECB. The question now is whether he will prolong his grip on power in Italy by moving from the prime ministership to the presidency.

The stakes of Italy’s presidential race extend beyond the figure of Draghi and his technocratic prowess. It would be more accurate to think of it as the latest round in the decades-long struggle to reconcile Italy’s position as a member of the inner circle of Europe—and the euro—with the shifting currents of Italian democracy. There is no guarantee, with or without Draghi at the helm, that Italy’s contradictions—and, with them, Europe’s—can still be managed.

Mario Mario Draghi speaks at a press conference in Frankfurt.

Mario Draghi speaks at a press conference following a meeting of the Governing Council of the European Central Bank in Frankfurt, Germany, in November 2013.DANIEL ROLAND/AFP via Getty Images

On Jan. 24, Italy’s parliamentarians and a caucus of regional representatives will start the process of electing a new president. What is normally an arcane domestic political game is attracting attention around the world because the race will most likely feature Mario Draghi—current Italian prime minister and former European Central Bank (ECB) boss whose famous slogan to do “whatever it takes” led the charge in saving the euro.

Today, the mood in the eurozone is calm. But Italy’s debts hang over the future of the euro as a currency. When he was first selected as prime minister nearly one year ago, many hoped that Draghi would perform the same type of transformation in Rome that he managed from his seat in Frankfurt, Germany, at the ECB. The question now is whether he will prolong his grip on power in Italy by moving from the prime ministership to the presidency.

The stakes of Italy’s presidential race extend beyond the figure of Draghi and his technocratic prowess. It would be more accurate to think of it as the latest round in the decades-long struggle to reconcile Italy’s position as a member of the inner circle of Europe—and the euro—with the shifting currents of Italian democracy. There is no guarantee, with or without Draghi at the helm, that Italy’s contradictions—and, with them, Europe’s—can still be managed.

In his former role, Draghi wielded the power of the central bank to calm the bond markets. Whether he is capable of using Rome’s available levers of political power to address the underlying problem of Italy’s inadequate growth is far less obvious.


The Italian Senate during its first session, in Rome on March 23, 2018

The Italian Senate meets for its first session, in Rome on March 23, 2018, following the March 4 parliamentary elections. ALBERTO PIZZOLI/AFP via Getty Images

In Italy’s postwar constitution, the presidency appears to perform a figurehead role. Executive power lies with the prime minister. But since the 1990s, the presidency has taken on a far more important role. Whereas prime ministers depend on shifting parliamentary coalitions, the president is chosen, indirectly by the Parliament and a commission of regional representatives, for seven years. Each new government formed by the parties is required to obtain the approval of the president, as is each piece of legislation. The president also decides on the dissolution of the Parliament and thus on the timing of elections.

During the Cold War, when the Christian Democrats dominated Italian politics, the presidency had little autonomous authority. What has made the presidency into the kingmaker of Italian politics is the fragmentation and polarization of the political system and dramas generated by the struggle to hold Italy within the eurozone. This new era began with the double crisis of politics and economics in 1992.

The all-encompassing corruption crisis that exploded in February 1992, known as tangentopoli, restructured the Italian political system. In the 1990s and 2000s, for the first time, governments in Italy swung between left and right, with the latter represented by Silvio Berlusconi’s new form of oligarchic populism. But since the end of the last Berlusconi government in 2011, Italian politics, like that in Germany, France, and arguably also the United States, has fragmented into multiple camps—up to six or more stretched from the left to the far-right. Berlusconi is still on the scene, but now he is one of the more docile conservatives. The last parliamentary elections, held in 2018, yielded a breakthrough for the techno-populist Five Star Movement and the nationalist, right-wing League. Since 2019, the League has been overtaken in the polls by the Brothers of Italy, an openly fascist-inspired party.

But governing in Italy is difficult not just because of political complexity. What makes it difficult to sustain legitimacy is the fact that the economy does not deliver the results that politicians need.

In the postwar period, Italy was one of Europe’s greatest success stories. By 1987, Italy could claim to have overtaken the United Kingdom in nominal GDP terms, an event referred to by Italians as il sorpasso (“the surpassing”). At the same time, public spending and public debts surged. Italy cushioned any excessive domestic inflation by periodic devaluations of the lira, its currency at the time. That model of growth reached its limits in the early 1990s, when France and Germany embarked on the project of European monetary union and set the tough Maastricht criteria for euro membership—debts not exceeding 60 percent of GDP and deficits of no more than 3 percent of GDP. In 1992, at the same time as its party political system was disintegrating, Italy faced an existential financial crisis.

Faced with the double disintegration of politics and economics, a generation of Italian technocrats and the centrist survivors of 1980s politics, Draghi among their number, set themselves to holding Italy in line with the Franco-German vision for Europe. They tamed the rise in Italy’s public debt—but at the price of a dramatic slowdown in economic growth. In real terms, Italy’s GDP in 2019 was only 4 percent above its level in 2000. In per capita terms, Italians saw no improvement over two decades, whereas GDP per capita in France and Germany improved by 16 percent and 25 percent, respectively.

This has had worrying implications for Italian society but also for its finances. Italy’s public debts, at around $2.9 trillion, are the fifth largest in the world, after the United States, Japan, China and France. In early 2021, as a result of the 2008 financial crisis and its aftermath and the COVID-19 shock, the all-important debt-to-GDP ratio stood at 158.5 percent—more than twice the level notionally still required by Europe’s Stability and Growth Pact. That ratio is far less than that of other high-debt countries such as Japan, but, as part of the European monetary system, decisions about the permissible level of debt are made in Brussels—and whether or not Italy’s debts have the backing of a central bank with unlimited firepower depends on the ECB.

Italy’s financial viability, in other words, depends on Europe. Conversely, as far as the eurozone is concerned, Italy is too big to fail. Italy and Europe are bound together in an unhappy marriage.

The pressure this has exercised on Italian politics is immense. Except in exceptional moments of crisis, for the last three decades Italian politicians have had to govern with budgets in primary surplus with tax revenues exceeding spending other than on interest payments. Not surprisingly, elected politicians have found this hard to manage. And the task of finding governments that can cope with the pressure has fallen to the president.

Since the early 1990s, Draghi is the fifth prime minister to govern Italy who did not emerge from the Parliament. Before him came Carlo Azeglio Ciampi (1993-1994), Lamberto Dini (1995-1996), Mario Monti (2011-2013), and Giuseppe Conte (2018-2021). Of these five prime ministers, four were chosen or solicited by the president; all of them were economists or central bankers.

It is common to describe the Italian presidency as a source of stability. The role has been filled to date by a series of dignified figures of the pre-1989 era of Italian politics. But this idea of the presidency as stabilizing raises the question: Presidential interventions may serve as a means of crisis management, but do they, in the long run, in fact weaken and destabilize party politics? Specifically, has the imperative to hold Italy in line with the euro, through the presidential appointment of bankers and economists to govern the country, contributed to the progressive disintegration of Italian party politics?


In the fall of 2011, with bond markets baying for blood, President Giorgio Napolitano (serving two terms between 2006 and 2015)—a grizzled veteran of the Italian Communist Party whom U.S. diplomat Henry Kissinger is said to have called his “favorite Communist”—set in motion the maneuvers to unseat Berlusconi as prime minister. For some, Napolitano was the “quiet power broker.” For others, he was “Re Giorgio,” or King George.

Enjoying an untouchable 80 percent approval rating, Napolitano humbled Berlusconi. As Napolitano accepted Berlusconi’s resignation on Nov. 8, 2011, Berlin, Paris, and Washington applauded. Rather than holding new elections, Napolitano picked Mario Monti, an unelected economist, professor, and former European commissioner, not just as a caretaker but as the man to do the dirty work of bringing Italy into line with the austerity demands of the European Union.

As far as the euro crisis was concerned, Monti’s government did the job. But in retrospect it was also the moment at which the current fragmentation began. The populist outsiders of the Five Star Movement surged in popularity. Meanwhile, on the right, the discrediting of Berlusconi cleared the space for more radical alternatives. It was only a matter of time before the populist forces of Five Star and the rebranded League achieved their breakthrough in the 2018 parliamentary elections. Five Star alone initially claimed no less than 36 percent of seats in the Senate and Chamber of Deputies. The people had clearly spoken. A populist government was inevitable. But the bond markets didn’t like it. Italian yields surged relative to those on German government debt. Once again, it was a moment for presidential action.

Sergio Mattarella, Napolitano’s successor, was once a left-wing Christian Democrat. Like his predecessor, he is a committed European. When the alliance between Five Star and the League presented their choice of government ministers to him for approval, Mattarella rejected Paolo Savona as unsuitable for the role of finance minister. His opposition to the euro posed a threat to Italy’s financial stability. In his place, Mattarella insisted on Giovanni Tria, a far more conventional economist. The unwritten rule of Italian democracy was clear: Voters could pick their government so long as it did not threaten the euro.

Tria’s appointment would prove to be strategic. Not only would he cut the deal that Italy needed to pass muster with the European Commission, but Mattarella’s pick would be the rock against which the attempt by Matteo Salvini, the leader of the nationalist League, to radicalize the government would fail. Salvini’s efforts to trigger new elections and capitalize on his party’s advantage in the polls resulted in the League being ousted from government. Mattarella approved a new coalition, now composed of Five Star and the center-left Democratic Party, to back Prime Minister Giuseppe Conte. Centrists all over Europe heaved a sigh of relief that Salvini and the League were removed from power, but the main beneficiary in the polls was the fascist-inspired Brothers of Italy, which now vies for the lead as the most popular party in Italy.

Conte played his hand well during the COVID-19 crisis. But when it came to distributing the spoils of more than 200 billion euros in funding from the NextGenerationEU program, there was opposition this time from the center-left, not the right. Leftists accused Conte of seeking to monopolize control over the funds and of lacking reformist vision. Matteo Renzi’s tiny Italia Viva party defected from the coalition, dropping Conte and calling on Mattarella to provide Italy with the leadership it needed at this historic juncture both for the country and Europe. That meant Draghi. Once again, the fall of a government was not enough to trigger an election. Instead, it resulted in yet another presidential powerplay. Rather than dismissing the parties from responsibility and forming a technocratic government, Draghi and Mattarella have bound them in. The result is by far the strongest government so far formed on the basis of the Parliament elected in 2018, including prominent representatives of Five Star, the League, the Democratic Party, and Berlusconi’s Forza Italia party. The only major party left out of power is the Brothers of Italy.

So far, the performance of Draghi’s government has garnered applause. After a depressing start, estimates of Italy’s growth in 2021 were revised upwards to an encouraging 6 percent. Italy lags behind the recovery of the U.K. or the United States, but S&P Global Ratings, a credit rating agency, has revised its outlook for Italian debt from stable to positive. The Economist dubbed Italy “country of the year.” It is good news for Italy and for Brussels, which needs Italy to succeed to vindicate the gamble on the NextGenerationEU program.


Italian President Sergio Mattarella (left) and Prime Minister Mario Draghi

Italian President Sergio Mattarella (left) and Prime Minister Draghi pose for a photo after the new cabinet ministers’ swearing-in ceremony at the presidential palace in Rome on Feb. 13, 2021. GUGLIELMO MANGIAPANE/POOL/AFP via Getty Images

Against this backdrop, the upcoming election to decide the replacement for Mattarella as president poses an unwelcome dilemma. There can be little doubt that powerful opinion in Brussels and many Italians are sufficiently worried about the immediate future to prefer Draghi to remain in place. But neither Mattarella nor Draghi seems willing to prolong their double act. Mattarella, a constitutional jurist of high repute, has insisted that he will not stand twice. A replacement must be found. Draghi, for his part, has made clear that he will not repeat the ill-fated attempt by Monti to transition from technocrat to politician. He will not contest the parliamentary elections that must be held at the latest by 2023. But if Mattarella sticks to his guns and refuses to prolong his term, then Draghi must act now if he wants the presidency. And that opens another risk. If Draghi is elected to the presidency, who will succeed him as prime minister? Will there have to be elections? In 2021, the consensus was that only Draghi would fit the bill. Is that still true today? And what might be the consequences of him moving to the presidential post?

Draghi has not yet declared openly that he is running. Openly campaigning for the presidency as Berlusconi is doing is a breach of etiquette. You wait to be chosen. It is possible that the machinations will yield another candidate. To be elected, Draghi needs the votes of the Democratic Party and Five Star, both of which have reason to fear early parliamentary elections. The number of seats in the Parliament is due to be reduced in size by almost 40 percent, and venal parliamentarians will be sure to cling to their jobs and pensions. They may force Draghi to remain in place and fight his corner as prime minister. As one observer has remarked, “in a telling demonstration of just how desperate the Italian establishment is, opera-goers at Milan’s La Scala theatre recently greeted President Sergio Mattarella, who was in the audience, with chants of ‘bis’ and ‘encore,’ imploring him to serve another term.”

Draghi himself seems more sanguine. At a press conference in December, widely seen as clearing the decks for his election to the presidency, Draghi announced that he regarded his main mission in taking the prime ministership as accomplished. The trillion-euro question, as far as both Italy and Europe are concerned, is whether he is right.

What faced Draghi when he took office in February 2021 was a three-step challenge: devising a public spending program; creating conditions in which it could be realized; and then actually spending the EU money and reaping the rewards. Draghi quickly oversaw the devising of a spending program and its prompt approval by the EU. It was unusual in that it was front-weighted toward structural reforms as a precondition for spending.

As far as creating the conditions for recovery, Draghi’s administration acted swiftly to contain the COVID-19 epidemic in the country through a concerted vaccination push. Draghi’s team has pushed bureaucratic reform and a streamlining of Italy’s arcane criminal justice system. Civil justice, too, will undergo reform. But not everything on this has been plain sailing. Changes to land registers that were supposed to set the stage for a more equitable property tax regime were stymied by the League. Italy has a terrible record of not spending funds allocated to it by Brussels. Under Draghi, both the ministries for tourism and for ecological transition, critical to the EU’s green vision, have been slow to roll out spending plans.

As for actual investments and the hoped-for acceleration of growth, only time will tell. The obstacles to more rapid growth in Italy are stubborn and deep-seated and its institutions creaky. There is little innovation and research and development. Italy ranks only 33rd among the most invested-in countries since 2003, below not only Spain but Romania. Compared with its rich Western European peers, Italy’s workforce has woefully low levels of training. It will take not months, or even years, but decades to remedy these deficits. Even the most optimistic predictions suggest that NextGenerationEU will add less than 1 percent per annum to GDP growth. That would be a step in the right direction, but it is hardly time to declare the job done.

What is at stake in the longer term are the life chances of entire cohorts of young Italians. They urgently need a better start in life. That will be sabotaged altogether if Rome is caught up in an acute fiscal and debt crisis, as it was in 2011-2012. The end for the ECB’s emergency bond purchase programs is in sight. With the debt-to-GDP ratio in excess of 158 percent, it will take a measure of goodwill and forbearance on the part of investors to avoid a surge in Italian yields and a dangerous doom loop of rising interest costs and increasingly unsustainable debt levels. Italy needs to be seen to be making progress to garner the goodwill necessary to stabilize that debt, through common fiscal measures such as NextGenerationEU, relaxation of EU rules, or ECB intervention.

Of course, Germany and the other Northern European states will have a veto over any such measures. But Italy is not powerless. With the departure of Angela Merkel as German chancellor, Draghi is the senior European leader. And he has been surprisingly outspoken on the need for changes to the fiscal rules. In December, Draghi told parliamentarians that the EU budget rules “did not work, made things worse, did not support countries in need, and would have been changed anyway.” The old rules were not compatible, Draghi declared, with the need to increase investment in climate and digital infrastructure. Together with French President Emmanuel Macron, Draghi has launched a plan to reform the Stability and Growth Pact to enable higher levels of public investment. France, with its own debt worries, is a natural ally.

Germany’s new chancellor, Olaf Scholz, will be more difficult to win over. But Berlin knows how important it is to have a working relationship with Rome. The 2018 populist breakthrough in Italy seriously alarmed the Merkel coalition. If Macron is reelected, Germany, France, and Italy could form a reformist triumvirate. But once again the question is posed: Will Draghi have more influence if he remains on the front line of politics as prime minister at a critical moment in Europe’s recovery, or would it be better to pursue Italy’s interests in the EU from the presidential position?


France's President Emmanuel Macron (right) hugs Draghi

French President Emmanuel Macron (right) hugs Draghi after the signing of the Franco-Italian Quirinal Treaty in Rome on Nov. 26, 2021. ALBERTO PIZZOLI/POOL/AFP via Getty Images

Whereas the European Commission may take the view that 2022-23 is all-important for the future of Europe and Italy’s place within it and may wish that Draghi remains as prime minister, Draghi loyalists favor the move to the presidency. For them, it is both the apotheosis of reform and a return to something like normality. The distinguished technocrat moves into the presidential position, allowing politics to resume. With the decks cleared, Draghi has set the stage for an Italian revival.

The problem is that Italy’s economic and political prospects are in fact highly uncertain. The Draghi camp insists that a reorganized Democratic Party-Five Star coalition could survive at least until 2023 under the protection of Draghi as president. The Brothers are menacing and strong, but they are not unstoppable. The party’s results in the recent regional elections were disappointing, notably its failure to take the mayoralty of Rome. The center-left Democratic Party, the mainstay of the governments since 2019, is gaining ground. The League is divided. Though Salvini is a wild card, the brief period in government exposed deep divides within his party, splitting the Euroskeptic populist wing from the business barons of Italy’s north. The latter are represented in Draghi’s cabinet in the form of Economic Development Minister Giancarlo Giorgetti. Ex-Finance Minister Tria serves as his advisor. It is hard to envision the likes of them forming a coalition with the Brothers. Nor can Berlusconi be counted to back a far-right adventure. At the end of his career, he seems to be aiming for respectability and redemption.

This at least is the optimistic case for a Draghi move to the presidency. The argument more commonly heard has a more ambiguous and defensive tone. The main aim, so the argument goes, must be to secure responsible government over the seven-year stretch by having a safe pair of hands in the presidency. Along with the checks and balances provided by Europe, having Draghi in the presidency should produce the guardrails that are needed to keep even a coalition of the League and the Brothers in line.

The right-wingers may agree. Draghi’s presence in the presidency would shield them against the full force of the bond markets. Rather than an apotheosis of reform, this version of Draghi in the presidency would have him underwriting the highest level of nationalism and xenophobia that Europe and the markets will tolerate. And if that is the case, skeptics ask, if Draghi is there only to prevent the worst, will his presence alone be enough to calm the markets without decisive ECB intervention?

There was a lot of talk in 2021 about the “Draghi effect.” The fact that the personal magic was so necessary is indicative of the uncertain outcome of the project that Draghi and his cohorts have been pursuing since the 1990s. They gambled on modernizing Italy by harnessing it to Europe. Italy is now harnessed to Europe, probably irrevocably so. But the growth record has been calamitous. Since the 1990s, the modernization project has been a huge disappointment. NextGenerationEU is a last-ditch effort to revive it. Draghi may boldly declare that his job as prime minister is done, but whether that is true depends on recalcitrant forces. It depends on Italy’s voters, and more than anything it depends on Italy’s economy.

Draghi has renowned political skills, but he is no politician. He is an economist. But for all his reputation as a miracle worker, Draghi no more than anyone else has a secret formula for giving the Italian economy a new lease on life in the age of globalization. In the absence of a patent recipe, Rome, Brussels, and Frankfurt will have to muddle through. They will have to hope that there is not a shock to bond markets or the kind of refugee crisis that supercharged the growth of the anti-immigrant far-right in 2015. Draghi and his cohorts are reaching the end of their careers. Since there is no alternative to persevering, the question is whether the baton will pass and to whom. We will know that the Draghi effect is something more than a Band-Aid when it is no longer so closely associated with the man himself.

Adam Tooze is a columnist at Foreign Policy and a history professor and director of the European Institute at Columbia University. His latest book is Crashed: How a Decade of Financial Crises Changed the World, and he is currently working on a history of the climate crisis. Twitter: @adam_tooze

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