Italian Prime Minister-to-be Mario Draghi has unveiled a cabinet loaded with well-respected executives and political heavyweights. But the choices are almost irrelevant. The former European Central Bank president, whose promise to do “whatever it takes” nearly a decade ago arguably saved the single currency, will be firmly calling the shots.
Draghi’s picks were shrouded in uncharacteristic secrecy for Rome, suggesting he will govern with his cards close to the vest in the tradition of a central banker. But his objectives are clear: to guide Italy through the tail end of the Covid-19 crisis, with a pro-growth agenda focused on usefully investing €209 billion of European Union funds earmarked for Italy.
The cabinet, which is an upgrade from the one his predecessor Giuseppe Conte assembled, is likely to receive backing next week from parliament. Among key economic positions, Bank of Italy veteran Daniele Franco, who was also state accountant general, will replace centre-left politician Roberto Gualtieri as economy minister. Roberto Cingolani, a physicist who is chief technology officer at Leonardo, will lead Italy’s green energy push at a new ministry. Former Vodafone boss Vittorio Colao will oversee Italy’s digital transformation.
The Draghi government’s immediate challenge will be to accelerate the rollout of vaccinations and kickstart an economic recovery. With 4.48 vaccinations per 100 citizens, Italy is ahead of Germany and France, but about one-fifth of Britain’s level. Italy’s sharp 8.8 per cent GDP contraction in 2020 was steeper than many EU neighbours. Without effective and targeted measures to support companies and lift labour participation, Italy will only recover its pre-pandemic economic output level by 2023, one of the last OECD countries to do so, UniCredit analysts predict.
Putting personal clout to use
The team led by Draghi, who was director general at the treasury and Bank of Italy governor before moving to Frankfurt, will also have to resolve the fate of troubled Alitalia, Banca Monte dei Paschi di Siena and Benetton family-controlled motorway operator ASPI. That suggests further executive changes to come, including at sovereign wealth fund Cassa Depositi e Prestiti.
Nonetheless, investors should take confidence from the starting line up and the knowledge that Draghi will be in the driving seat. Borrowing costs for Italian ten-year hit record lows on Friday before Draghi presented his cabinet. Such market exuberance sets a high bar for the new government. The best card Draghi can play with his new team is Draghi himself.