Editorial: Italy’s predicament

After PM Mario Draghi’s departure, yields on Italian state bonds grew, surpassing those of Greece, which fell below three percent, allowing our country to borrow more easily and cheaply than Italy.

Over the last days, many in Athens spitefully applauded the decision of three of the parties that comprised Italy’s coalition government to abstain from a no-confidence motion in parliament against the former ECB chief and technocrat PM Mario Draghi, which torpedoed his government and led to his resignation.

They characterised the PM as “imposed” [without legitimisation] and «callous” and accused him of doing nothing to temper the social impact of inflation.

They overlooked the fact that for 18 months he worked hard and in an organised fashion to “free” Italy from the weight of the repercussions of the pandemic, to revive the economy and put it on a growth path, to secure hundreds of millions of euros from the EU Pandemic Recovery Fund, and to put Italy back on the international stage, from which it was effectively absent, having lost its role in European and international affairs, even though it remained in the club of the world’s richest countries.

As the days went by, the repercussions of Draghi’s departure became obvious.

Markets evaluated the loss of political stability that his premiership ensured.

Concerns about the refinancing of Italy’s burgeoning debt increased.

The yields on Italian state bonds grew, surpassing those of Greece, which fell below three percent, allowing our country to borrow more easily and cheaply than Italy.

In the run-up to the difficult and uncertain 25 September Italian elections, there have been revelations that are very problematical, as regards the country’s democratic course.

The Italian press over the last days is rife with revealing reports that attribute Draghi’s departure to foreign intervention.

La Stampa published documents confirming that the decision of Matteo Salvini’s Lega party to withdraw its trust in Draghi was preceded by a meeting between Salvini and an envoy of Russian President Vladimir Putin, who reportedly sought to ascertain whether the party will continue to support Draghi.

That was because Putin was enraged by Draghi’s firm and direct stance against the Russian invasion of Ukraine and considered him the mastermind of tough sanctions against Moscow, especially as regards freezing Russian capital in Western banks.

The Italian press also cited a meeting between US Treasury Secretary Janet Yellen and Draghi in Washington, at which they reportedly decided on which sanctions to impose.

In recent days, it became known in Rome that before the coalition of right-wing parties took its decisions, their leaders attended a dinner with former PM Silvio Berlusconi, who organised the gathering.

The prevailing view there was reportedly that they cannot allow Draghi to manage Italy’s 200bn euro share of EU Recovery Fund monies.

They decided that the time has come for an exclusively right-wing government that would supposedly distribute EU funding based on the needs of the people, and not based on the priorities of the banking establishment.

Nothing could be further from the truth, as Recovery Fund monies are allocated for specific purposes and objectives that are agreed to at the highest levels of the EU.

Programmes for the use of the funds are submitted to European authorities on the basis of particular specifications and are accordingly approved or rejected.

The funding certainly cannot be used any which way each member-state chooses.

In any event, either because Italy’s populist leaders thought they had a golden opportunity, or because they were beholden to Russia, with which they demonstrably maintained ties, or for whatever other reason, Italy lost its political stability, and it is confronted with an adventure with as yet undetermined repercussions that lie ahead.

Italy’s predicament demonstrates that political stability, especially in the current, dangerous emergency conditions, is quantifiable and invaluable.

By the same token, instability in periods of geopolitical reordering entails great dangers.

MARIOThat must be understood by Greece as well.

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