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Home Bankers Italy Turns to Its Central Bankers When Politicians Fail

Italy Turns to Its Central Bankers When Politicians Fail

(Bloomberg) — Every time Italy is about to go off the rails, there’s always been the same solution: call in the technocrat. Former European Central Bank President Mario Draghi is the latest in a long list of fixers.

That’s when you know things are really bad, either because the finances are in such disarray that bond markets are panicking or because the usual bickering among parties has turned into complete political gridlock. It’s a peculiar way for a western democracy to function, especially since the outsider brought in to solve the most intractable of problems is not elected by the people.

“After a lot of troubles Italy is in very good hands and not in populist hands,” former Prime Minister Matteo Renzi, who prompted ex-Premier Giuseppe Conte’s resignation by withdrawing his small Italy Alive party from the ruling coalition, said in an interview Thursday. “Mario Draghi is the best man, he saved the euro and will save Italy.”

But like Italy’s tradition of revolving-door governments, the reasons are rooted in the country’s past. The framers of the postwar constitution wanted to ensure that Italy’s parliamentary system would be fully inoculated against the threat of dictatorship. If the price was a proliferation of parties and unruly coalitions, so be it.

That’s why Italy’s head of state, a ceremonial position in normal times, becomes critical during a crisis. When there is no way out, and elections are too risky, the president can make the call and appoint an expert. In accepting that challenge, Draghi said “it was a difficult moment.”

“It’s a way out when the system breaks down,” said Stefano Silvestri, a political analyst and adviser to governments, who served under Lamberto Dini’s technocratic government in the 1990s. “In my experience, the advantage of a technical government is we were able to talk to all political forces to get things done, so we passed both left-wing and right-wing measures without prejudice, gathering support across the board.”

This is the fourth time in three decades that a technocrat has been appointed to address the country’s various dysfunctions. And the move usually comes as a relief to investors and disillusioned Italians. The technocrats get a year or two to make the kind of painful and unpopular cost cuts that politicians are loathe to push through. When the job is done, the country goes to the ballot box.

In Draghi’s case, if he can negotiate the support he needs from Italy’s fragmented parliament, the job won’t be to slash but to build. And he’ll have over 209 billion euros ($251 billion) of cash coming in the next few years via the European Union recovery fund to help him.

He’ll need to show a common touch as well. The pandemic has not only devastated the economy, it’s also traumatized the nation. Italians are still haunted by images of coffins in line for the morgue in the city of Bergamo.

They also have terrible memories of their last…

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