ROME (Reuters) – Former European Central Bank chief Mario Draghi on Wednesday set about trying to form a government to end Italy’s political crisis, tackle the coronavirus emergency and overcome deep economic recession.
Draghi, widely credited with saving the euro zone from collapse in 2012, accepted the mandate from head of State Sergio Mattarella, saying he was confident he could find backing in Italy’s fractured parliament for a new administration.
Financial markets rallied, hopeful Draghi can spearhead long-awaited reforms to boost growth in the euro zone’s third largest but most sluggish economy, bolstering the currency bloc.
All eyes turn to parliament, where Draghi must win backing from hesitant and divided parties across the political spectrum to get a government off the ground.
“This is a difficult time,” Draghi said after meeting Mattarella. “Beating the pandemic, completing the vaccination campaign, offering answers to the everyday problems of the people and relaunching the country are the challenges we face.”
The president moved quickly to anoint Draghi after talks aimed at salvaging outgoing Prime Minister Giuseppe Conte’s 17-month-old coalition imploded on Tuesday evening.
Mattarella warned that a new government had to take office immediately to prevent Italy from missing out on more than 200 billion euros ($243 billion) from a European Union fund designed to help overcome the economic slump.
Draghi said Italy must seize the moment: “We have extraordinary European Union resources at our disposal, we have the opportunity to do so much for our country.”
Italy’s borrowing costs fell sharply on Wednesday while the Milan bourse blue chip index rose 2.1%, the strongest gain in a month.
Early signs from the political parties were mixed. The centre-left Democratic Party (PD) signalled it was ready to support the highly respected economist, while its coalition ally, the anti-establishment 5-Star Movement, said it would not.
A political source said Draghi might offer the former coalition partners cabinet positions to get them on board.
The alliance of rightist parties led by Matteo Salvini’s League, which leads in opinion polls, said it preferred to go to early elections two years ahead of schedule, but would listen to Draghi’s proposals “without prejudice”.
The League and the PD are sworn political enemies who have repeatedly vowed that they would never join a majority together. A plausible scenario may see several parties abstaining in votes of confidence to ensure Draghi can launch a government.
Were he to fail, the blow to Italy’s international image and market backlash could be considerable, and Mattarella gave him no time limit for finding a workable majority.
One League source said the party would offer its support if it got a commitment from Draghi to hold elections within a year.
Draghi whose illustrious career has earned him the nickname “Super Mario”, was famous for pledging to do “whatever it takes” to save the single European currency during his time at the ECB.
He had largely vanished from the public eye since his ECB term ended in October 2019, but he emerged as a potential premier as political turmoil combined in recent weeks with health and economic emergencies to form a perfect storm.
The first European country to be hit by the coronavirus, Italy has seen almost 90,000 deaths since its outbreak almost a year ago – the sixth-highest toll in the world.
Lockdowns aimed at curbing the contagion have devastated the economy and data released on Tuesday showed that Italy’s gross domestic product shrank by 8.8% in 2020 – its steepest annual drop since World War Two.
A Draghi government would reinforce Italy’s international standing at a time when it has the presidency of the G20. But taking the job would carry risks for him.
The last time a technocrat took charge was in 2011, when economist Mario Monti, was entrusted with helping Italy out of a debt crisis. Parliamentarians soon turned on him when they deemed his economic medicine too pungent.
(Additional reporting by Giselda Vagnoni, Giuseppe Fonte in Rome, Maria Pia Quaglia and Sara Rossi in Milan; Editing by Giles Elgood and David Gregorio)