Mario Draghi earns his summer vacation

Mario Draghi scored big just as he appeared to be on the point of foundering. Six months after taking office, Italy’s prime minister (and former president of the European Central Bank) continues to beat the odds and deliver reforms that have eluded Italy for decades.
For 30 years, Italian politicians failed in their efforts to repair the criminal and civil legal system, one of the slowest in Europe. Civil cases, for example, take an average of seven years to reach a conclusion. The sluggishness has been blamed for dampening foreign and domestic investment. It has doubtless contributed to two decades of economic decline. Speeding up the system has long been seen as key to boosting growth. It’s for this reason that Brussels made justice reform a condition for Italy to receive more than 200 billion euros ($237 billion) in loans and grants from the post-pandemic NextGenEU fund.
While Brussels was agreed, Italian politicians weren’t. Draghi faced opposition to the move from within his disparate radical left-to-radical right coalition government. And yet he managed to coax an agreement out of his political partners, which include the populist Five Star Movement, the radical right League and members of the judiciary, according to a person in the room. The legislation is now poised to pass the lower house of
parliament.
Draghi’s success has much to do with the carrot-and-stick conditionality of Brussels’ bumper handout to Italy, the biggest in Europe. The conditional offer of more money than Italy has had to spend for decades certainly played a role in glueing together the fragile coalition.
But the prime minister’s diplomatic and technocratic skills played a role, too. Before becoming “Super Mario” for his handling the European debt crisis as ECB president, he was Italy’s General Director of the Treasury and governor of the country’s central bank. He has played a significant role in the management of Italian state-owned enterprises.
This has given him close connections within the deep state — the institutions that have genuine influence in Italy because of the short-lived nature of Italian governments. They are crucial to Draghi’s structural reform agenda.
It also helps that pollsters regularly put the prime minister’s popularity at around 70%, while his coalition partners and opponents alike hover around 20%. Polls indicate that support for Five Star has slumped to below 15%, which would translate to less than half of the votes it received in the last election.
Putting in place the reform is a whole different endeavor. For starters, 16,500 law graduates have to be hired to help reduce the civil trial backlog. The EU has earmarked 2.7 billion euros in its post-pandemic funding to help the process. In addition, Italy has only 12 judges for every 100,000 citizens, half the ratio in Germany.
And then there’s everything else. Italian politics is a brutal competition for power and resources amid economic decline. The country’s vast debt is set to hit 160% of post-pandemic gross domestic product. Draghi has gotten 60% of Italians vaccinated in five months, but he still has to deal with a stubborn group of anti-vaxxers. And then there’s another area of reforms that has to be addressed to satisfy Brussels: the tax system.

—Bloomberg