What the Future Holds for Mario Draghi Back in Italy

Gross domestic product per person has fallen more than 10% since 2011, unemployment is stuck near 10%. The country’s cherished position as Europe’s second-largest manufacturing powerhouse is threatened by France. Meanwhile, the banking system, which took pride in weathering the global financial crisis without needing a bailout, emerged severely weakened from years of low or nonexistent growth, is still reeling from years of recession, and hasn’t been able to reform.

Throughout all this, Italy’s political and social cohesion has visibly deteriorated. To gauge the degree of instability, one simply needs to look at the list of prime ministers—Silvio Berlusconi, Mario Monti, Enrico Letta, Matteo Renzi, Paolo Gentiloni, Giuseppe Conte—and finance ministers—Giulio Tremonti, Monti, Vittorio Grilli, Fabrizio Saccomanni, Pier Carlo Padoan, Giovanni Tria, and Roberto Gualtieri—who have represented the country in Brussels and on the international stage while Draghi held his post in Frankfurt. He’s been in office continuously longer than any of those Italian officials, a double-edged distinction for a public figure in the country. Who knows what might be asked of him when he returns?

More frustrating still for the ECB president is the fact that the euro has become a target of the desperation and anger that many Italians feel after the succession of crises, austerity measures, promised reforms, and declining living standards that have marked the past decade—and so far have no end in sight. Almost half of all Italians saw the euro as a “bad thing” for their country in 2014 and again in 2016, outnumbering those who viewed the single currency positively. Only recently has support for the euro picked up above 50%.

Under the populist government that lasted until August 2019, the prospect of Italexit—if still very remote—has become a constant part of the political discourse. Parts of the League, the country’s dominant party, seem ever bent on making it happen, sooner or later. While relatively few Italians really want a return to the lira, the country’s debt burden—and the inability of government after government to bring it down—means the possibility of a catastrophic and sudden departure is always around the corner.

Draghi has watched these gyrations with keen interest while remaining substantially detached. Throughout his term, he’s constantly had to deal with the German-held stereotype of the happy-spending southerner who would create runaway inflation and bend the central bank’s policies to help profligate countries such as Italy. Faced with questions about his passport, with the insinuation that it made him unsuitable for the job, the ECB president sometimes responded with humor, but more often with thinly disguised impatience. The “clichés of the past,” he’s said, must be left behind to build a European future. “This doesn’t affect me,” Draghi said in 2013, when Der Spiegel confronted him with allegations he’s out to help irresponsible “Club Med” nations.

No one in the Governing Council of the European Central Bank, he continued, “thinks in nationalist categories; that applies more to those who voice such unjustified criticisms.” When Die Zeit asked him about a year later whether he was “offended by the charge of being an agent of the southern countries,” Draghi’s answer was a curt “Yes.” He said, “I don’t accept any labels, but I present facts.” He conceded, quoting the Nobel Prize-winning economist and New York Times columnist Paul Krugman: “When faith meets evidence, evidence doesn’t stand a chance.”

If being Italian has made Draghi’s job in Frankfurt more complicated, it certainly didn’t make his position back home any simpler. One of the nicknames he’s earned in Italy in his early days as ECB chief is L’Americano, the American, because of his many years of work and study in the U.S. Theresa May’s infamous description of global civil servants as citizens “of nowhere” could well apply to Draghi, too, no matter how strong his roots are with his native country—family in Milan, frequent visits to his hometown, Rome, a country house in Umbria, a small seaside retreat in Lavinio. His policies, his personality, and his career have often been perceived as having little in common with his native land. To be sure, he has little patience with the many shortcomings of Italy and its citizens, nor has he ever sought to justify or conceal those opinions. Indeed, Draghi has been accused of being an “anomalous Italian” or even anti-Italian—what with his cosmopolitanism, elite connections, the mystery of big finance, and Italy’s penchant for conspiracy theories.

Much is made in Italy of Draghi’s backroom network, his role as a secret regisseur—some would say puppet master—of Italian politics and his capacity and willingness to wield the ECB’s financial prowess to covertly steer the country’s destiny. Certainly, he met its prime ministers regularly at gatherings of the European Council and its finance ministers in similarly pan-EU conventions, as well as Italian business leaders and bank CEOs. But there’s no evidence of any direct intervention in the country’s politics.

That doesn’t mean Draghi turns a blind eye to what’s happening back home. His views on the latest twists and turns of Italy’s byzantine politics are sought on the sidelines of European and international meetings, and he’s offered thorough analyses to colleagues, ministers, and academics over the past years. But it’s only rarely—and in any case obliquely—that he ventures into suggesting a specific course of action. The outsize impression many Italians have of Draghi’s influence is partly the consequence of his broader success and partly the effect of the detached pragmatism he’s cultivated. Faced with bureaucratic complexity and economic insecurity, the Italian public is simply more and more convinced that a select handful of men pull strings from behind the scenes.

Central banks—with their hallowed independence, difficult-to-understand but far-reaching powers, and penchant for hard-to-decipher acronyms—are a perfect target for conspiracy theories. Draghi himself has repeatedly said that monetary policy cannot be the only game in town and has called on governments and politicians to do their part and not to expect central banks to save the day.

After changing the direction of Europe’s debt crisis in 2012 with three simple words, “whatever it takes,” his almost mythical status among the world’s financial elite has increased expectations about his future role in Italy. Draghi, however, will be returning to an Italy profoundly different from the one he left in 2011. Elections in March 2018 utterly changed the country’s political landscape with an unwieldy coalition of the center-right League and the populist Five Star movement, putting it in the center of the nativist and anti-EU wave washing over Europe. On the table were pledges to reverse some of the financial reforms of previous years and to ignore Europe’s spending limits, even if it led to increasing the national debt. And, of course, the country flirted with the idea of leaving the single currency. Financial markets started asking for a much higher premium to buy the country’s bonds, bringing yields close to crisis levels for a few months.

From his office in Frankfurt, Draghi did little but warn of the potential effect on investor sentiment and European partners of the proclamations of some of the coalition’s members. “Complicated questions have easy, wrong answers” is the quip by German economist Rudi Dornbusch, one of Draghi’s professors during his time at MIT in the 1970s—and it’s a good way to sum up the ECB president’s attitude.

With the populists in the ascendance, Draghi found himself more detached from Italy’s rulers than he’d been for decades. Ironically, the situation simply increased the calls for his return to the national stage when his ECB term runs out.

It’s not the first time. In 2015, when the ECB embarked on quantitative easing, Draghi’s name was frequently cited as a candidate for the country’s presidency by Italian media, so much so that the central banker had to go on the record to deny his interest in the post. “I don’t want to be a politician,” he told Germany’s Handelsblatt newspaper. He’s repeated it in private to ministers and top European officials. The presidency would go to Sergio Mattarella, who still holds office and who was Draghi’s only regular contact in the government.

Draghi will return from his tenure in Frankfurt to—no surprise—a new government in Rome, following the collapse of the Five Star and League coalition in August. Despite the change in the balance of power, there are few signs that the general mood at home has changed significantly. The League under Matteo Salvini has doubled down on its strident anti-EU rhetoric and is still leading in the polls. The current administration in Italy promises to be just as conflict-ridden and short-lived as the one that preceded it. And a new recession for the country may be just around the corner.

He’s personally faced populist anger and frustration in his native Italy before. When Draghi visits family in Milan or Rome, his days are less structured and the security cordoning him off from the world is more relaxed. He likes going shopping, and the people he meets often offer him an earful of their views. It’s not always easy listening. In 2013 a young man approached Draghi in the streets of Rome. He explained that he was working odd jobs at night to make ends meet and had one simple question: “Why can’t you print money so that we all have enough to live on?” Draghi’s answer required a long argument touching upon the risk of inflation, European treaties, and the cautionary tales of economic history—difficult points to make when the face of his interlocutor bore the evidence of suffering.

Draghi is careful not to make any judgment, even in private, when confronted with the “easy, wrong answers” of politicians to difficult questions. After all, he and his policies too have been deemed partially culpable for the rise of populism. This doesn’t mean, of course, that Draghi has any sympathy for the populists’ conclusions. His argument can be summed up thus: If what’s fueling populism is a feeling of impotence in the face of migration, globalization, technological change, and, more generally, the growing complexity of society, retrenching behind national borders is not an effective way to “take back control,” to use one of the most effective catchphrases of the Brexit campaign.

In the populist and nationalist way of thinking, Draghi argued in early 2019 as he accepted an honorary degree from the University of Bologna, “if citizens want to be able to exert more control over their destinies, they have to loosen the EU’s political structures. But this belief is wrong. It is wrong because it conflates independence with sovereignty.” In his perspective, the power-sharing required by European institutions is the best way to make sure that people’s sovereignty is more than a hollow slogan. He said in his Bologna speech, “True sovereignty is reflected not in the power of making laws—as a legal definition would have it—but in the ability to control outcomes and respond to the fundamental needs of the people: what John Locke defines as their ‘peace, safety, and public good.’ The ability to make independent decisions does not guarantee countries such control. In other words, independence does not guarantee sovereignty.”

So what will happen after Oct. 31, when Draghi steps down from his commanding role as the most powerful Italian in the world and returns to his native land? No one appears to believe that Draghi’s public life is over. Even Berlusconi, who often clashed with Draghi, seems to expect him to be a player in Italian affairs. In an interview before the May 2019 European Parliament elections, he said Draghi “would be the right man for a high-profile role” in the country. If so, he will no longer be able to avoid the hard questions—and the difficult answers.

—An excerpt adapted from Mario Draghi, L’artefice by Jana Randow and Alessandro Speciale, to be published in Italian on Oct. 8 by Rizzoli.

©2019 Bloomberg L.P.