Italy: Why Draghi's resignation chaos is exacerbating the euro crisis
As a former President of the European Central Bank (ECB), the independent Draghi enjoyed the confidence of foreign investors. This had a positive effect on Italy's economic credibility – although the country is now indebted at 148 percent of gross domestic product.
Now it is over. Now the facts and not the psychology are in the foreground again. The current government crisis of the permanent European problem child is hitting the European Union harder than comparable situations in previous years. After all, the third government since the 2018 elections has just failed.
The left-wing populist "Five Stars" had refused to express their confidence in Draghi. The protest movement, which had become the strongest party in the previous election, thus de facto left the coalition. In any case, they had recently made an increasing mood against government decisions.
Italy crisis as match in the EU pyre
But why is the situation today more difficult than in past government crises? The European Union is in a massive energy crisis due to the sanctions against Russia. In addition, there is inflation, an unprecedented flood of money from the ECB, the war in Ukraine and the dramatic, seemingly unstoppable loss in value of the euro. Most recently, the price had fallen below one US dollar.
If Italy, which is always seen as a factor of uncertainty, were to fall into ungovernability, it would look like a match in a dried-up pyre that had been built for years. President Sergio Mattarella could not just spontaneously, but stubbornly refuse to call new elections and give either another politician or another Draghi the task of forming a government.
But why is the situation today more difficult than in past government crises? The European Union is in a massive energy crisis due to the sanctions against Russia. In addition, there is inflation, an unprecedented flood of money from the ECB, the war in Ukraine and the dramatic, seemingly unstoppable loss in value of the euro. Most recently, the price had fallen below one US dollar.
If Italy, which is always seen as a factor of uncertainty, were to fall into ungovernability, it would look like a match in a dried-up pyre that had been built for years. President Sergio Mattarella could not just spontaneously, but stubbornly refuse to call new elections and give either another politician or another Draghi the task of forming a government.
Right-wing alliance favorite in new elections
Since the 74-year-old has ruled out taking on such a task again, early elections, which are due next year anyway, would be the most honest solution. But then the right-wing Fratelli d'Italia ("Brothers of Italy") would be the strongest party. In the current polls, they are ahead of the social-democratic PD and Matteo Salvini's right-wing Lega. Together with Silvio Berlusconi's Forza Italia, a right-wing conservative alliance could form the new government.
If the most important country after Germany and France were to fall into the hands of such a government, it would be a nightmare come true for the EU Commission. In addition to Poland and Hungary, the EU would have to deal with a third country that had broken away from the mainstream.
It is uncertain what measures Brussels would take in response. However, there is no doubt that the situation could give the euro even less stability due to the internal disputes in the EU. The most important question, however, is: what happens before a new government is formed?
Since the 74-year-old has ruled out taking on such a task again, early elections, which are due next year anyway, would be the most honest solution. But then the right-wing Fratelli d'Italia ("Brothers of Italy") would be the strongest party. In the current polls, they are ahead of the social-democratic PD and Matteo Salvini's right-wing Lega. Together with Silvio Berlusconi's Forza Italia, a right-wing conservative alliance could form the new government.
If the most important country after Germany and France were to fall into the hands of such a government, it would be a nightmare come true for the EU Commission. In addition to Poland and Hungary, the EU would have to deal with a third country that had broken away from the mainstream.
It is uncertain what measures Brussels would take in response. However, there is no doubt that the situation could give the euro even less stability due to the internal disputes in the EU. The most important question, however, is: what happens before a new government is formed?
Source: Junge Freiheit
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