Italian PM Mario Draghi’s resignation will have ripple effects in Europe : NPR

Italian officials and voters alike are mulling over Prime Minister Mario Draghi’s resignation last week – and experts say it’s for good reason.

Draghi was appointed to office in February 2021. For the past year and a half, Draghi has been heralded for his role in leading Italy out of a health and economic crisis. Many hoped for Draghi’s guidance as Europe faces soaring inflation and Russia wages war against Ukraine.

He’s been credited for restoring Italy’s economy and reputation. Now, experts warn that both hang in the balance as uncertainty grows in Italy and Europe at-large.

“Mario Draghi was such a trusted pair of hands across Europe,” said Christopher Way, an associate professor in government at Cornell University who specializes in European politics. “He was so respected for his competence that it’s a loss no matter who replaces him.”

Italy is slated to hold early elections on Sept. 25, but it will likely take several additional months before a new coalition government is formed. (Back in 2018, it took 90 days after parliamentary elections for a new government to be sworn in.) Until then, Draghi has agreed to stay in office as a temporary caretaker at President Sergio Mattarella’s request.

The fall of Italy’s current government

Known as the national unity government, various parties throughout the spectrum of Italian politics joined together in response to the pandemic. For a while, the government had a rare period of stability, according to Way.

But that didn’t last long with the government’s term originally set to expire spring 2023. Way said party leaders began jockeying for position in advance of the election next year, which is why parliamentary infighting started.

It all came to a head this month as Draghi tried to rally support for a key relief bill, designed to help consumers and industries with soaring energy costs.

The populist 5-Star Movement refused to back the bill, raising concerns about how a new garbage incinerator for Rome may affect the environment. Then, the League, a far-right group, and Forza Italia, a center-right party, followed suit and refused to support the prime minister.

Although Draghi was still widely favored by the president and several groups in his coalition, he offered to step down in response to the turmoil. His resignation was first rejected but eventually accepted by the president after it became clear that the coalition was no longer cooperating.

“The majority of national unity that has sustained this government from its creation doesn’t exist any more,” Draghi wrote in a statement before submitting his resignation on Thursday.

Uncertainty of Italy and Europe’s economy

Last summer, the European Union gave Italy billions in aid for pandemic recovery under the condition that the country would prioritize growing its economy and managing its debt.

As the former European Central Bank chief, Draghi was entrusted to handle the relief funds and put Italy’s finances in order — for the country and the rest of Europe’s sake.

That particularly puts the European Central Bank in a difficult situation, Way said. As inflation climbs across Europe, the bank will need to raise interest rates quickly, but doing so will also hike up Italy’s debt and risk the sustainability of Italy’s finances.

As the third largest economy in the eurozone, both options are likely to have ripple effects in Europe and the United States.

“Potentially destabilizing the Italian economy and the market for its sovereign debt has major implications for the European Union and for the survivability of the euro,” Way said.

Now, with Draghi’s departure, there’s growing concern of whether the next elected government will be fiscally responsible and stay committed to the economic reforms laid out by the EU.

Europe’s united front against Russia’s war in Ukraine might be threatened

Since Russia’s invasion of Ukraine, Europe has been able to marshal a strong united front against Russia leader Vladimir Putin. But that might change depending on the results of Italy’s upcoming elections, said Lucia Rubinelli, an assistant professor in political science at Yale University who has studied Italian politics.

“Draghi was definitely a leading force in Europe against Russia,” Rubinelli said. “The problem with Draghi gone is that Italy and many Italian parties have for a very long time been dealing with Russia on better, friendlier terms.”

Among the top coalition contenders are the League and Forza Italia, both of whom reportedly have close ties with Putin. If they were elected into the next government, Rubinelli suggests that the EU’s strategies — including sanctions imposed on Russia and military aid packages to Ukraine — may become more complicated.

Italy will likely continue to cooperate in the EU’s plans against Russia, Rubinelli adds. But the larger question is what Italy’s next elected government may want from the EU in return, which could be issues like having specific sanctions lifted or freedom to enact tighter immigration policies.