Former ECB Chief Mario Draghi Tapped to Lead Italy Out of Its Crisis

(Bloomberg) -- Mario Draghi, the former president of the European Central Bank, has been approached to become Italy’s next prime minister in a bid to steer the virus-battered country out of its worst recession since the end of World War II.

The euro rose on the news that the veteran policymaker, widely praised for his pivotal role during the sovereign debt crisis, would take the helm.

Sergio Mattarella, Italy’s head of state, will meet Draghi on Wednesday after two rounds of talks failed to seal an agreement among parties on a new premiership for the outgoing Giuseppe Conte, who had hoped to make a comeback.

Instead, the president is poised to formally ask Draghi to try to form a government. Mattarella, whose task it is to pick a premier-designate, had earlier appealed to political parties to give the strongest support possible to what he said would be a high-profile figure, warning that Italy could not afford early elections with the pandemic and invoking the need to agree on the European Union’s recovery fund.

The appointment of a crisis-fighter of Draghi’s caliber will be welcomed by markets and could put an end to the political intrigue that threatened to make Italy ungovernable.

Draghi’s job will be to get a grip on debt, which risks becoming unmanageable, and find a path to recovery for an economy that has barely grown in decades. He will also need to deploy all his diplomacy to navigate a complex political landscape rife with infighting.

Super Mario

A trained economist, Draghi is credited with shoring up the euro at the height of the sovereign debt crisis in 2012 with his “Whatever it takes” speech. He also started the quantitative-easing program of sovereign debt purchases which has subsequently been expanded to become a key tool in supporting the European economy during the pandemic.

Draghi ended his eight years as the helm of the ECB in 2019, and ever since then he’s kept pundits guessing on whether he’d consider a leading role in Italian politics.

The euro gained versus the dollar following the announcement. It traded at 1.2040 at 9:59 p.m. in Milan, reversing earlier losses.

The latest, rapid development also appears to put an end to Conte’s political career -- at least for now. The outgoing premier, who has no political party of his own, may decide to set up a new grouping, given his strong poll numbers.

Conte’s ruling coalition was brought down by Matteo Renzi, himself a former premier. The two men dislike each other and this outcome represents a victory for Renzi.

In public, Renzi had kept Italy guessing on whether he would agree to Conte’s return, saying only that he wouldn’t veto anyone as the next premier. But in private, he floated Draghi’s name, according to officials who asked not to be named on confidential deliberations.

Draghi’s return will not be celebrated by all lawmakers. Several members of the Five Star Movement, the biggest force in parliament, are wary of supporting a figure like Draghi because of their origins as an anti-establishment group.

But Draghi is expected to be able to count on broad support from across the political spectrum.

©2021 Bloomberg L.P.