(Milan) The resignation of Italian Prime Minister Mario Draghi, a sign of seriousness in a traditionally unstable country, caused a shock wave on Thursday in Europe and on the markets, worried about the sudden rise in the cost of its enormous debt.
Posted at 11:20 a.m.
Rarely, the European Commissioner for the Economy Paolo Gentiloni came out of his reserve on Wednesday, castigating the “irresponsible” parties who let go of the former boss of the ECB, at the risk of plunging the country into a “perfect storm”.
Mario Draghi’s exit from the stage comes at the worst time for Italy, which must deal with the impact of the war in Ukraine, reduce its dependence on Russian gas and embark on difficult reforms in view of the granting of funds of the European recovery plan.
“His resignation is a loss for Italy, because the Draghi government was in the process of carrying out a program of reforms expected for decades”, commented to AFP Giuliano Noci, professor of strategy at the Polytechnic of Milan. , and “it is also a loss for Europe” where Mr. Draghi “had become a point of reference”.
“Italy is not Greece, but the third largest economy in Europe. A serious crisis in Italy would have immediate negative repercussions throughout Europe,” he fears.
Manna of 200 billion euros
The first beneficiary of the European recovery plan, Italy is counting on a windfall of nearly 200 billion euros to stimulate its growth, which has long lagged behind that of its neighbors.
But the disbursement of funds is linked to a series of reforms, which seem compromised with the departure of Mr. Draghi, even if the latter continues to expedite current affairs.
“Italy risks losing tens of billions of euros from the recovery plan if 70% of the reforms planned in the plan are not carried out by the end of 2022”, warns a European diplomat.
Sign of the nervousness of investors, the Milan Stock Exchange suffered the largest decline in Europe Thursday, with a drop of 2% at the opening.
Another worry, Italy is crumbling under a colossal debt of more than 2,700 billion euros, or some 150% of GDP, the highest ratio in the euro zone behind Greece.
The “spread”, the closely watched gap between German and Italian ten-year interest rates, rose to 240 basis points, reaching its highest since spring 2020, in the midst of the COVID-19 pandemic.
New weapon of the ECB
The departure of Mario Draghi, certainly expected, complicated the task of her successor at the head of the ECB, Christine Lagarde, who announced on the same day a new instrument aimed at protecting the most fragile States against speculative attacks on their debt.
“This is not the ultimate ‘bazooka’ that the markets were waiting for,” commented AFP Franck Dixmier, director of bond management at Allianz IG. Especially since the candidate countries for the system must meet several criteria which “converge towards the notion of budgetary discipline”.
A rigor that is difficult to reconcile with a return to power of the populist right, at the top of the polls, which risks derailing the “spread”, as was the case in 2018, after the arrival of a coalition between the League (extreme right) and the M5S (antisystem).
“Italy’s credibility is suffering greatly” from the departure of the former central banker, judge Federico Vetrella, analyst at IG Italia. According to him, the “spread” could reach “300 points in the medium term”, which “will make the weight of the public debt even heavier”.
Should we therefore fear a return to an Italian debt crisis as in 2012?
“Not necessarily, everything will depend on the attitude of the ECB and the European Union,” said Mr. Noci. “Markets are not interested in the color of governments, but in their stability and clarity of purpose. »