New Italian Prime Minister Mario Draghi.
Barcroft Media | Barcroft Media | Getty Images
LONDON – New Italian Prime Minister Mario Draghi is already transforming the political scene in Rome and boosting stock markets.
In the aftermath of new political chaos, the former president of the European Central Bank was called upon to become Italy’s new leader and save the turbulent economy. His arrival has been described as “better than expected” after gathering broad political support and curbing the threat from populist forces.
Sworn in on Saturday, Draghi presented his cabinet this weekend – a group consisting mainly of politicians from various parties and also some technocrats from key ministries.
“This is the best possible outcome, and better than I expected because it provides a degree of stability and political accountability,” Erik Nielsen, group chief economist at UniCredit, said in a research note on Sunday.
Draghi has gained the support of most of the major political forces in Italy, over concerns that a purely technocratic team would have a short life. The next general election in Italy is not until early 2023.
The return of Mario Draghi, now Prime Minister of Italy, has radically changed the political landscape.
By ensuring broad political support and a diverse team, Draghi has already improved the outlook for Italy. Analysts have become more optimistic about Italian government bonds, citing “expectations of more efficient use of Next Generation EU (NGEU) funds, structural reforms and better prospects for vaccination,” said a note from UniCredit.
At the same time, Italy’s main stock index is up more than 7% since the beginning of the month.
Barclays analysts believe economic growth will pick up in the second half of the year as well. “The return of Mario Draghi, now Prime Minister of Italy, has radically changed the political landscape,” Barclays analysts also said in a note Monday.
They explained that the winner of the month’s political crisis appears to be the anti-immigration Lega party. The more centrist PD was previously against joining forces with Lega and this new unity has created tensions within the party. Meanwhile, the other major party, the Five Star Movement, saw internal divisions when it approved Draghi’s premiership last week.
Dormant populism
This could change the picture in Italian opinion polls. Lega is still the most popular political party with about 24% of the public support. However, the Five Star Movement and the PD – which formed the previous government – could face adversity. PD, which enjoyed 20% of public support in January, lost one percentage point in a poll published Feb. 11.
At the same time, Draghi’s arrival has dampened the rhetoric of populism, at least for now.
“What we can say today is that populism in Italy is weaker, both through the intervention of Draghi and through the intervention of the pandemic and European integration,” Lorenzo Castellani, a historian at LUISS ‘private university, told Guido Carli. week on CNBC.
Italy had two major populist forces in the aftermath of the 2018 general election: Lega and the Five Star Movement. But they have now both grown into a less anti-EU position, Erik Jones, a professor at Johns Hopkins University, told CNBC on Monday.
“ The Five Star Movement made its pivot when it supported Ursula von der Leyen (President of the European Commission) in June 2019; the League made its pivot when it decided to support Draghi in forming an openly pro-European government of national unity last week, ”he added.