Draghi loses his best ally: economic growth

Mario Draghi

The European Commission's growth forecasts for 2022 have just been released and they confirm the worst thing that can happen to an economic manager of Mario Draghi's prestige: economic growth is going downwards and a recession is looming ever closer. Thus, for an economy that in 2020 lost 9.0 points of its Gross Domestic Product (GDP) and in 2021 (with the Draghi government "in carica" since 13 February of the same year) recovered no less than 6.6 points, now the growth forecast for 2022, which had already been lowered by the Minister of Economy and Finance (Daniele Franco) to 3.3% a month ago, is down to a poor 2.4%. Within the so-called "big four" (Germany, France, Italy and Spain), only the Germans have a lower growth forecast (specifically, 1.6%), with the difference that the Germans did not lose nine points in 2020, but only 4.6; and that in 2021 they grew to 6.9%, that is, three tenths of a point above Italy.

In contrast to this reality, the Commission forecasts that France will grow by 3.1% this year, while Spain (which has the most room for growth because it lost the most in 2020 and recovered the least in 2021) is currently at 4%. Figures that, in any case, give the impression that in a matter of weeks they will again be revised downwards, which will surely further weaken Mario Draghi's figure as a manager.

Certainly, everyone is suffering the consequences of the war that has been raging on Ukrainian territory since 24 February, since the rise in energy prices and dependence on Russian sources is having a direct impact on production costs and on consumer purchasing power, which is increasingly diminished. The problem, in Draghi's case, is that, although he claims that all he is doing is aligning himself with the European Union's "iron fist" policy towards Russia, it is he himself, along with the French president (Macron), who has decided to prioritise Putin's defeat over a possible negotiated peace or even the abandonment of Ukraine to its fate, as happened, on the other hand, with the former Yugoslavia between 1991 and 1995.

What is most striking is that, despite this reality, the "maggioranza" that sustains the Draghi government, which involves all the major parties except Meloni's Brothers of Italy, remains in place: no one is leaving it. However, it is no secret that all the political parties, knowing that the countdown to the general elections that could take place in the first half of March 2023 has already begun, have started campaigning and the "disengagement" from what Draghi is doing is becoming less and less hidden.

In essence, although everyone talks about wanting 'peace', in reality everyone has a different way of conceiving it: for Draghi (whose strongest supporters at the moment are the Democratic Party (PD) and Italia Viva) 'peace' is synonymous with the defeat of the Russian army, whether it decides to withdraw to its borders or loses on the battlefield to the increasingly emboldened Ukrainian army. For Salvini, on the other hand, 'peace' is synonymous with sitting down to negotiate with Russia, against the wishes of the Ukrainian government, and ceding, if necessary, the easternmost part of Ukraine (mainly Donbass, Donetsk and Lugansk).

True to his way of conceiving politics, the Lega leader has begun to whip up the growing unease in transalpine society with the constant rise in the cost of living, which is eroding the level of wealth available to an economy with strong inequalities between its northernmost and southernmost areas. So, in practice, even though three of his people are currently members of the Council of Ministers chaired by Mario Draghi, the Lombard politician is campaigning against the Roman economist and financier. The difference in what is at stake between the two is considerable: for Salvini, these elections, which are expected to take place at the beginning of next year (if they are not brought forward to the last months of 2022), are probably his last chance to become prime minister, after a political career that has lasted almost three decades and in which he has been a councillor, MEP, MP, senator, Interior Minister and even deputy prime minister. On the other hand, Draghi is only jeopardising his chances of becoming president of the Republic, something he has longed for, but which would not be a major problem given the very important "magistracies" he has already held, including governor of the Bank of Italy, president of the European Central Bank and "premier", to mention the most recent ones he has held.

However, Salvini is not the only problem for Draghi: so is the ailing Five Star Movement. It is the other party that has been positioning itself against the prime minister's stance on what is happening in Ukraine. Like Salvini, this peculiar party likes to use demagogy and populism, and has focused its criticism on excessive military spending that, in its view, should be spent on improving the quality of life of its fellow citizens. And all this despite the fact that the EU authorities have just acknowledged that in recent years most member states have been reducing their respective defence budgets. But, like Salvini, for the moment they refuse to abandon the 'maggioranza' that sustains the government.

The most relevant aspect of all this is that precisely these two formations (Lega and Cinque Stelle) are the ones without whose votes Draghi could not govern: what are they waiting for, then, to leave the Council of Ministers and move to the opposition where the Roman Meloni is already? Whatever their reasons, both are very concerned about their electoral prospects. Let us remember that in a Parliament that is going to go from 945 members to just 600, Salvini would need a third of the votes in the elections for his groups in both Houses to revalidate seats, when polls are giving him less than what he achieved in March 2018 (clearly below 20% of the direct vote). Even worse is the situation of Five Star, which would require 50 per cent of the votes cast for the MPs and senators who won seats four years ago to be able to sit in those seats again.

The reality is that there is still a long way to go before we know how this will play out: as long as the war continues, the Draghi government's economic management will go downhill; but, if Putin is defeated in the coming weeks (which is plausible given that the Russians are going from setback to setback), by the end of the year the current reality may have begun to turn around. Draghi knows this, which is why he is stepping on the accelerator in the form of increased economic sanctions against the Russian Federation. We shall see how all this turns out, but the reality is that Draghi's prestige may turn into growing unpopularity. And, meanwhile, Salvini and Five Star are regaining some of their lost support. The only reality is that we have entered the countdown to the general elections and the beginning of the 20th Legislature of the Italian Republic born on 2 June 1946. This means, in practice, that the parties feel increasingly free to support a Draghi who, of course, continues to have the full confidence of the President of the Republic, but it is well known that in a country where the Parliament has so much power, the key lies in what the political parties decide. For the moment, they all continue to support the current government, but how long will this support last? We will find out in the coming months, but now it is becoming increasingly clear that the wind is blowing more and more strongly against the Draghi government: that is what it means to govern and take risky decisions.

Pablo Martín de Santa Olalla Saludes is a professor at the Centro Universitario ESERP and author of the book 'Historia de la Italia republicana, 1946-2021' (Sílex Ediciones, 2021).