The three biggest issues facing Italy’s new government

Mario Draghi arrives at the helm of the eurozone's third-largest economy at a delicate time.

The three biggest issues facing Italy's new government
Draghi will be charged with accelerating the pace of vaccinations while trying to impede transmission of new strains of coronavirus already appearing across the country. Photo: AFP

Mario Draghi was formally sworn in as Italy's new prime minister on Saturday, following weeks of instability in the eurozone's third-largest economy.

The respected economist credited with saving the monetary union in 2012 now faces a major challenge in turning around Italy's devastated economy, as the coronavirus pandemic continues to take hundreds of lives each day. 

Here are the top issues Draghi will have to tackle as prime minister:

Economic crisis

Italy is currently in its worst recession since World War II, brought about by the pandemic. But growth was already moribund before the coronavirus crisis, exacerbated by the highest debt-to-GDP ratio in the eurozone after Greece. 

Italy's gross domestic product fell by a staggering 8.9 percent last year, according to preliminary data, after it became the first European country to face the full force of Covid-19. 

Draghi will have to tackle Italy's worst recession since World War II. Photo: AFP

A nationwide lockdown in March and April paralysed much of the country's economic activity, as did new restrictions imposed at the end of the year to confront a second wave of the virus.

Shuttered businesses have thrown waves of people out of work, even before a freeze on job dismissals is due to end next month. Around 426,000 people have lost their jobs since February 2020, with disproportionately high numbers of women and the young. 

Draghi will be able to turn to the more than 200 billion euros ($242 billion) in grants and loans expected in Italy as part of the European Union's recovery fund.

But the previous government collapsed in a dispute over how to spend the windfall, with conflicting demands for immediate stimulus measures and long-term structural reforms.

READ ALSO: These are Italy's new government ministers under Mario Draghi

Rome has until April to submit a spending plan for the EU funds to Brussels.Italy's economy is weighed down by longstanding structural issues, from low labour productivity and choking red tape in public administration and the courts to low foreign investment and an underperforming educational system.

After a promising start in December, Italy's vaccination programme has slowed, a trend politicians have blamed on supply shortages. Only 1.2 million people have received two doses of Covid-19 vaccine, out of a population of 60 million, according to health ministry data Friday.

Healthcare emergency

Over 92,000 people have died of Covid-19 in Italy, which has seen more than 2.6 million of cases of coronavirus.Draghi will be charged with accelerating the pace of vaccinations while trying to impede transmission of new strains of coronavirus already appearing across the country.

“We need quick decisions because the course of the virus and its variants are certainly not slowing down for a government crisis,” said the independent health think tank GIMBE on Thursday.

Draghi secured the support of most Italian political parties, after the Giuseppe Conte's centre-left coalition collapsed. Photo: AFP


Draghi's priorities will become harder to execute if he faces the same internal dissent that brought down the last government under Giuseppe Conte. 

For now, he has behind him a coalition of virtually all of Italy's parties in parliament, from the left-leaning Democratic Party to the far-right, populist League led by opposition leader Matteo Salvini.   

He personally enjoys robust popular support, with 62 percent of Italians showing confidence in the leader, according to a survey in La Stampa daily conducted February 5.

READ ALSO: How are Italy's prime ministers chosen?

But experts warn his political capital could soon wane, particularly if he begins to push through reforms opposed by trade unions and others.  

“Politics, like nature, moves in cycles: honeymoon, plateau, decline,” wrote political risk consultancy Policy Sonarin a note published Thursday.  

“Draghi is now in his honeymoon phase — no one will dare challenge him for several months. At some point, however, the tailwind will begin to fade away.”

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Berlusconi to run for Senate in Italy’s elections

Scandal-plagued former premier Silvio Berlusconi said he plans to return to Italy's parliament in upcoming elections, almost a decade after being forced out over a conviction for tax fraud.

Berlusconi to run for Senate in Italy's elections

“I think that, in the end, I will be present myself as a candidate for the Senate, so that all these people who asked me will finally be happy,” the 85-year-old billionaire and media mogul told Rai radio on Wednesday.

After helping bring down Prime Minister Mario Draghi last month by withdrawing its support, Berlusconi’s centre-right Forza Italia party looks set to return to power in elections on September 25th.

It is part of a right-wing coalition led by Giorgia Meloni’s post-fascist Brothers of Italy, which includes Matteo Salvini’s anti-immigration League.

Berlusconi brushed off reports he is worried about the possibility of Meloni – whose motto is “God, country and family” – becoming prime minister.

Noting the agreement between the parties that whoever wins the most votes chooses the prime minister, he said: “If it is Giorgia, I am sure she will prove capable of the difficult task.”

READ ALSO: Italy’s hard right set for election victory after left-wing alliance collapses

But he urged voters to back his party as the moderate voice in the coalition, emphasising its European, Atlanticist stance.

“Every extra vote in Forza Italia will strengthen the moderate, centrist profile of the coalition,” he said in a separate interview published Wednesday in the Il Giornale newspaper.

League party leader Matteo Salvini (L), Fratelli d’Italia leader Giorgia Meloni and Forza Italia leader Silvio Berlusconi pictured in October 2021. The trio look set to take power following snap elections in September. Photo by CLAUDIO PERI / ANSA / AFP

Berlusconi was Italy’s prime minister three times in the 1990s and 2000s, but has dominated public life for far longer as head of a vast media and sports empire.

The Senate expelled him in November 2013 following his conviction for tax fraud, and he was banned from taking part in a general election for six years.

He was elected to the European Parliament in 2019, however, and threw his hat in the ring earlier this year to become Italy’s president — although his candidacy was predictably short-lived.

Berlusconi remains a hugely controversial figure  in Italy and embroiled in the many legal wrangles that have characterised his long career.

He remains on trial for allegedly paying guests to lie about his notorious “bunga-bunga” sex parties while prime minister.

Berlusconi has also suffered a string of health issues, some related to his hospitalisation for coronavirus in September 2020, after which he said he had almost died.