Draghi, his future leaves the markets with bated breath

International analyzes highlight the premier’s results and from a Quirinal point of view they show the desire for stability and concern about the possible loss of momentum of reforms

Big words of praise for Draghi, concern in international markets for what could possibly happen after his election to the Quirinale. Today in Italy with Mario Draghi “there is a leader and you can perceive a sense of direction”. So in a nutshell Gilles Moec, chief economist of AXA Investment Managers summarized the vision of the markets on the role of the current Prime Minister. Yet his eventual move from Palazzo Chigi to the Quirinale reassures and worries international investors. It is an apparent contradiction that emerges from the declarations and analyzes of recent weeks, made by market operators who in the end, as Francesco Guerrera recalled in ‘Repubblica’, are always ready to ‘vote with their feet’, that is, liquidating in short times – if not convinced by the post-Quirinal institutional scenarios – the huge positions on Italian foreign debt. With potentially catastrophic outcomes.

On one thing, all international observers seem to agree: uncertainty reigns supreme and could remain so whether Draghi becomes Mattarella’s successor or remains at the helm of the government. As the Japanese bank Nomura wrote for the parties of the current majority, “it would be risky not to support Draghi given the broad consensus he boasts”. But, he adds, “even if the government remained in the government, political uncertainties would still be destined to grow in the course of 2022 given the electoral deadline of 2023”.

In reality, rather than the appointment of Draghi as the new President, it is the match for Palazzo Chigi that worries investors. This was explained by the rating agency Fitch who recalled how “if Draghi were elected, he would have to resign as prime minister and this could lead to early elections”. A vote that “would create instability in the short term” not to mention that “the electoral campaign and the formation of the new government would increase the risks for Italy of missing the Next Generation Eu goals with delays in receiving funding”. On the ‘good news’ front, however, Fitch acknowledges that Draghi at the Quirinale “would be a factor of political stability for the next 7 years” for Italy especially as regards dialogue with Europe and the risks of market instability.

The same vision for the Dbrs agency which fears “implications for Italy’s reform program” with a passage by Mario Draghi from Palazzo Chigi to the Quirinale which could “undermine the stability of the executive since the available successors could have difficulty in obtaining the support of the same majority “in a” fragmented “Parliament like the present one. Here too, however, he recognizes himself as Draghi in the highest office of the Republic “for seven years he could guarantee accountability, international credibility and a pro-EU position” as well as “exercising his moral persuasion to maintain momentum on the reform agenda” .

Voting for continuity at Palazzo Chigi are the Germans of Berenberg Bank who in an analysis stressed “if Draghi remained in his post as premier and a president of the republic was eventually elected with a large majority, in the end Draghi could continue the his work on reforms “. A rise of the former ECB president to the Quirinale instead “would take place – it is explained – at the expense of short-term political uncertainty and long-term risks. A new prime minister would not have Draghi’s international status and internal popularity and could struggle to keep the current broad coalition in parliament united also with the support of a President Draghi “.

“Even more important – continues Berenberg – if he became president. Draghi could no longer lead the reforms and control the spending of NextGenerationEU funds”: a sum (largely future debt) exceeding 200 billion euros, which Italy cannot afford to waste. For this, it is the meaning of the German analysis, it is better to go ahead with the work already started at Palazzo Chigi.

From London, on the other hand, the markets to which the ‘Financial Times’ gives voice seem to have no doubts: if “Mario Draghi’s reformist premiership is nearing its end, the passage to the presidency of Italy appears – according to the economic newspaper – the best way to to carry on the excellent work “done up to now by the former president of the ECB.

From a perspective close to Labor, the ‘Guardian’ – which recognizes the Draghi effect as the fact that “Italian politics stood out in 2021 for being reassuring, unusually boring” – underlines how “Italy, and in particular the center-left , became addicted to Draghi in an unhealthy way. ” Especially in the light of a possible future center-right sovereign, the former president of the ECB – “although he is a formidable player who has used the time at his disposal well” – must not be seen as the main bulwark against this possibility.

“Despite the very positive international media coverage, the ‘Draghi effect’ has not completely convinced foreign investors”, the London Observatory of Oxford Economics recalled a few weeks ago, reporting a flow of funds to our country that has grown in the last twelve months. but not significantly. And the fears – the analysis read – are that “most likely the next Italian government will not be as reformist as the current one” and it is likely “that the political environment in the coming years will not be as favorable as this one”.

For Sylvain Broyer, S&P chief economist for Europe, the priority for Italy is “not to jeopardize the current strong confidence of businesses and households”, even if “we don’t see a great incentive to go to early elections” .

From Goldman Sachs, however, above all a temporal factor is pointed out: if the election of Draghi to the Quirinale “would strengthen Italy’s anchoring and its policy within Europe” at the same time it would create “uncertainty about the new government” . And “given the divergent interests between parties in Parliament and the typical length of time it takes to form a new government, we are more concerned about the markets that this scenario would lead to a delay in the implementation of the Recovery Fund and related reforms”.

But it would be wrong to limit the question of Draghi’s future only from an Italian perspective. In fact, Goldman Sachs itself, in a subsequent analysis, has also brought this ‘dilemma’ to a European level. Recalling the new Rome-Paris partnership sealed by Draghi and Macron, the US bank also stressed that “there is a risk that if Draghi goes up to the Quirinale, the subsequent appointment of a new prime minister and a new executive may de facto slow progress. on various EU issues and weaken the Franco-Italian axis “. As if to say that the future of an entire continent may depend on the future of a leader at this moment.