Italy is now in a political crisis. With a cost of living crisis, the war in Ukraine and a planned “anti-fragmentation” package from the European Central Bank, it’s the worst possible time to be confused. This week will be crucial and not only for Italy. The best hope lies in Draghi continuing as prime minister for as long as possible. He will address MPs in parliament on Wednesday. Elections that had been scheduled for spring 2023, when Draghi was due to step down, could be held unless Mattarella can help heal the coalition’s rift. While there is a risk of delaying the election — a coalition under Draghi could be seen limping along without a mandate — it would be far better to give him time to advance meaningful policies in the coming months. The priority is to approve the next budget and push through the reforms needed to unlock the next tranche of the EU’s €750 billion Covid-19 recovery fund, €200 billion of which is earmarked for Italy. The gap between Italian and German borrowing costs — already wide after the ECB said it would end its bond-buying program — widened into political anger. The high cost of borrowing for Italy, which must overcome its 200 billion euro debt later this year, is particularly problematic given the ECB’s expected rate hike on Thursday. The central bank will also reveal how it plans to tackle the fragmentation of yields between over-indebted countries such as Italy and their northern neighbours. Whatever its final design, the tool will require some political stability, not least because conditions will be imposed on countries benefiting from the new facility. Italy under Draghi has been a steadfast ally of Ukraine against Russia’s illegal war. A political vacuum in Rome would be yet another distraction for the West: the United Kingdom is busy choosing a new prime minister, while France’s Emmanuel Macron lacks a parliamentary majority. The war has cast a long shadow over Italian politics, not only because it caused energy and food prices to rise, but also because of longstanding ties with Moscow. Five Star leader Giuseppe Conte has openly questioned the wisdom of sending weapons to Ukraine, causing a split in his party. That so much should rest on the shoulders of Draghi, an unelected technocrat, is an indictment of Italy’s political class. Knowing that Draghi’s premiership has an expiration date, he has failed to convince markets that they can find a reasonable path to continue his reforms that Italy desperately needs. Instead, as elections approach, internal strife has increased. It echoes the embarrassing failure earlier this year to find a successor – beyond Draghi – to Mattarella, who was pushed at age 80 to serve a second seven-year term. Italy’s political parties should commit to Draghi’s reforms and urge him to stay until the election. But they also need to credibly plan for a post-Draghi future. So should the EU and the ECB: both cling to the former ECB president as a reliable and crisis-hardened partner. The window for structural reforms in Italy opened by Draghi may be closing fast. Italian politicians, including Draghi himself, must ensure it is not shut down this week. Whatever it needs.
