Opinion

Italy Shouldn’t Need Draghi

A stronger democracy wouldn’t need a strong man.

Mario Draghi
European Central Bank president Mario Draghi walks to a news conference in Frankfurt, October 25, 2018 (ECB/Martin Lamberts)

It’s not an endorsement of Italian democracy that the country needs another above-the-fray technocrat to pull it out of the mud.

If Mario Draghi, the former European Central Bank chief, wins the support of parliament, three of the last six Italian prime ministers will have been apolitical appointees.

I hope Ferdinando Giugliano is right and Draghi will succeed where his predecessors failed, but recent history — and Giugliano points this out too — does not inspire confidence. Neither Mario Monti nor Giuseppe Conte was able break the political logjam to enact much-needed reforms.

Technocrats

Monti, a former European commissioner, replaced Silvio Berlusconi as prime minister at the depth of the euro crisis in 2011.

Berlusconi had left Italy ill-prepared for the downturn. He cut taxes, raised pensions and did nothing to mend Italy’s north-south divide or streamline its legal system, which is still the slowest and most bloated in Europe.

Monti reduced public-sector salaries and subsidies to local governments, hiked property taxes and VAT and increased the retirement age. He restored confidence in Italy’s ability to pay its debts but could not get economic and labor reforms, which would have made Italy more competitive, through parliament.

Conte was plucked from academic obscurity by the anti-establishment Five Star Movement when it won the election in 2018. He has competently managed Italy’s response to the outbreak of coronavirus, but his economic policies have been counterproductive. He cut taxes, passed a €20 billion tax-evasion amnesty and canceled labor reforms which had made it only slightly easier to hire and fire workers.

Failures

I know I’m starting to sound like a broken record, but Italy is failing its next generation.

Just 45 percent of Italians under the age of 30 were in work before the pandemic, compared to a eurozone average of 63 percent. Of those, eight in ten could only find part-time work.

Italy spends less on tertiary education that its neighbors. Only 27 percent of Italians in their thirties have a higher degree, the second-lowest rate in the eurozone, where the average is 40 percent.

Real incomes for Italians of all ages have barely grown in two decades, when the Italian economy as a whole grew a miserly 4 percent.

Blame

Many Italians, including Italian politicians, blame the EU, but Italy has repeatedly violated European debt and deficit rules and consistently ignored the European Commission’s policy recommendations.

Year after year, the EU calls on Italy to simplify its tax code, invest more in education and job training and improve the efficiency of its justice system to tackle corruption and attract more foreign investment.

Year after year, Italy does nothing of the sort.

It is one of the worst countries in the developed world to start and run a business in. It takes too long to get credit, to enforce contracts and to resolve bankruptcies.

Well-connected incumbents benefit, because they can keep out nimble competitors. Older Italians on an indefinite contract benefit, because they are almost impossible to lay off and can retire early. Young Italians find it almost impossible to start a business or become a lawyer, notary, pharmacist or even a taxi driver, because licensing requirements are so excessive. They languish in low-skilled, low-paid work, often in the informal economy, with no benefits and no job security.

Tax evasion is between two and three times higher in Italy than in France, Germany and Spain. Corruption is at Balkan levels. Italian bureaucracy is slow and obstinate.

Italy will be the largest beneficiary of the EU’s €750 billion coronavirus recovery fund, qualifying for some €200 billion in aid, but, half a year after the fund was agreed, it still doesn’t have a plan for how to spend the money.

Maybe Draghi is the man to make a plan, but the fact that 945 elected politicians couldn’t is an indictment of Italy’s entire political class.

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