Mario Draghi, who tendered his resignation as Italy’s prime minister last week, has an extraordinary CV for a contemporary statesman: managing director of the World Bank in the 1980s; Director General of the Italian Ministry of Finance in the 1990s; Governor of the Bank of Italy in the 2000s; and president of the European Central Bank in the financial crisis of the 2010s, where he is credited with saving the euro.
For supporters of Mr Draghi’s government, of the EU and of the global economy, he has become a symbol of democratic continuity in the face of economic upheaval and partisan extremism. In this view, Mr Draghi’s departure, prompted by the boycott of a confidence vote by three parties in his government, portends disaster. The Italian foreign minister, Luigi Di Maio, called it a “dark chapter for Italy.”
For now, Mr. Draghi continues as interim prime minister. The front-runner to replace him after the elections in September is the nationalist-populist politician Giorgia Meloni. In one of its newsletters, JPMorgan described the parliamentary maneuvers that led to Mr Draghi’s ouster as a “populist coup”. Since Mr Draghi has supported sanctions against Russia for its Ukraine invasion, Italian columnists have denounced his opponents as “filoputiniani” or “Putin lovers”.
But there is one strange thing about Mr Draghi’s role as a symbol of democracy: No voters anywhere have ever cast a vote for him. He was installed to break a political deadlock in early 2021 at the request of President Sergio Mattarella, who is not himself directly elected. Although Mr. Draghi is honorable and capable, his resignation is a triumph of democracy, at least as the word democracy has traditionally been understood.
Italy’s problem is that its governments now serve two masters: the electorate and the global financial markets. Perhaps this applies to all countries in the global economy. But this is not how democracy is supposed to work, and Italy is in a special bind. With national debt over 150 percent of gross domestic product, a declining population and rising interest rates, Italy is trapped in a single European currency that it cannot devalue.
Several times in recent decades, ordinary politics in Italy have been suspended and “technical” governments like Mr Draghi’s have been called in to implement emergency measures. This means that the Italian government listens less to the citizens, even as it calls on them to make great sacrifices and adjustments.
The Italian electorate looks set to become permanently populist. Italy’s 2018 election was the third major anti-systemic upheaval in the middle of the last decade, after Brexit and Donald Trump’s election in 2016. The left-populist Five Star Movement, founded by comedian Beppe Grillo, took a third of the vote. This party opposed corruption and pollution and called for redistributive social programs, even passing a version of a basic income. It governed in coalition with the League, a right-wing populist party led by Matteo Salvini, which focused on closing Italy’s Mediterranean coast to African immigration. The government, led by Giuseppe Conte, was wildly popular.
When Covid hit in 2020, the European Central Bank promised Italy €200 billion in pandemic aid. Prime Minister Conte, who at this time led a more traditional progressive government in coalition with the Social Democrats, was still very popular. But neither the EU nor the Roman establishment trusted him to spend all that money. When pro-business former prime minister Matteo Renzi pulled his allies out of the coalition, a government of national unity (including all parties except Ms Melonis on the far right) was formed around Mr Draghi, who, it was said, had the “credibility” to calm the markets.
But what does Mr. Draghi’s credibility consist of? In a democracy, credibility comes from a popular mandate. In a “tech government,” credibility comes from connections to bankers, regulators, and other insiders. When someone in Mr. Draghi’s position takes power, it may be unclear whether democracy is asking for help from financial institutions, or whether financial institutions have backed democracy into a corner.
Last week, in the wake of Mr Draghi’s resignation, an adviser to Italian bank UniCredit posed a hypothetical question about the European Central Bank: “What if right-wing candidates do well and the bond market sells off – should the ECB intervene?” The “risk” that technocratic risk managers deal with may be democracy itself.
The European Union’s Covid aid plan was intended to push Italy towards free market reforms. In return for the aid, Brussels gained greater influence over how Italy is governed. Italy has received only 46 billion euros of the promised sums; dozens of reforms will be needed before the EU hands out the rest.
These reforms have come to seem unpalatable to many voters. For example, the EU wanted Italy’s beaches to be opened up to market competition. The Italian coast is public property. The state grants concessions to small businesses that manage beaches. Such companies, often held in the same family for generations, employ around 100,000 Italians.
Supporters of the reforms, which were supported by Mr. Draghi, calls the families that run the old beach concessions “monopolists” who profit from public property. Opponents of the reforms, the most vocal of whom has been Mr. Salvini, would say that the term “monopoly” is better suited to the international hotel chains that are likely to wipe out these small businesses.
The European Union also wanted Italy to change its laws on car transport. There is a special licensing scheme for car and driver operators in Italy, separate from the scheme for taxis. Licenses are expensive. It is difficult to form consortia where one entrepreneur can manage a stable of gig workers who drive. Until now, Uber has only operated in Italy in the most limited way.
Proponents of market reform probably consider it a grand theft that a taxi from the center of Milan to the distant Malpensa airport should cost 100 euros, and they probably see competition from Uber as the way to solve it. For opponents, Uber is a problem, not a solution.
Many of these reforms were to be completed before the end of the year. The timing of Mr. Draghi’s departure is thus not accidental. By the time he appeared before the Senate last week to argue for continuing, many Italians were seething at violations of their democracy, violations that were not really justified in the EU’s interest in macroeconomic stability.
It is a legitimate interest. Italy’s debt could still have consequences for its citizens and Europe’s. But no one has yet arrived at a satisfactory way to solve the problem of debt in any heavily indebted country. Solving such problems may require injecting outside money into a political system, and that proves difficult to do in a partisan way.
You can get the money to save your country if Mr Draghi is your prime minister, Italians were essentially told, but not otherwise. Under these circumstances, there is nothing “populist” or Putin-loving or unreasonable about worrying about the consequences for democracy.