The markets are relieved, the worst has been avoided, Italy has not sunk into political chaos: the Prime Minister, Mario Draghi, remains at the helm of the government thanks to the re-election as President of Sergio Mattarella, guarantor of stability, but the task promises to be immense.
Act II of the motley coalition in power, which brings together almost all parties, began on Monday against the backdrop of deep divisions that emerged during the frantic search for a new president and which risk leaving traces.
Maintaining the government of Mr. Draghi, who was previously a favorite in the presidential election, is “good news, because he is the only one who can guarantee the unity of this coalition”, the economist told AFP. Carlo Cottarelli.
But “can a coalition that failed to agree on a ‘new’ president” and which had to beg the old one to stay “be able to implement an extremely complex economic program, which more is in a pre-election year? ” he asks.
Several economic projects will be crucial for the future.
After a euphoric year 2021, which saw economic growth rebound by 6.5%, unseen since the 1970s, the wave of the Omicron variant, soaring energy prices and supply difficulties for companies are spoiling celebration.
A coalition that failed to agree on a “new” president [et qui a dû supplier l’ancien de rester] will it be able to implement an extremely complex economic program, especially in a pre-election year?
Business sentiment is at half mast, with January’s confidence index being the lowest in nine months. Inflation reached 4.2% in 2021 and weighs on growth prospects.
Barely sketched recovery plan
To stimulate growth, Italy can count on the European recovery plan supposed to promote post-COVID recovery, of which it is the main beneficiary, with 191.5 billion euros over the period 2021-2026.
Renowned for misusing European funds, Italy achieved all 51 goals agreed with Brussels in 2021, after pocketing a first payment of more than 24 billion euros in August. In 2022, the rate increases to 100 objectives, for a sum of nearly 46 billion euros.
Several reforms initiated and demanded for a long time by the European Commission are still pending, including those of the cadastre of real estate never declared to the tax authorities, seaside concessions which escape any regulation or even pensions, in a country which is experiencing a sharp fall of the birth rate.
From the first government meeting after the election, Mr. Draghi sent a strong signal to Brussels on Monday, inviting all his ministers to “indicate the state of implementation of the investments and reforms for which they are responsible”.
A colossal public debt
Over the years, Italy has accumulated a colossal debt. At the end of 2021, this stood at nearly 2,700 billion euros, or 153.5% of GDP, the highest ratio in the euro zone behind that of Greece, which is also significantly above the 60% limit provided for by the Maastricht rules.
Thanks to growth, Italy will enter a virtuous circle which will enable it to “repay a viable debt”, assured Mr. Draghi on several occasions.
Brussels suspended the rules of budgetary discipline in 2020, an unprecedented measure taken due to the pandemic. But this leniency cannot last forever.
One of the “benefits” of keeping Mario Draghi is “that he will be at the negotiating table when it comes to rewriting the budgetary rules” of the European stability pact, decrypt analysts from Capital Economics.