Good luck, Mario!

"Let's not delude ourselves, with this Germany it is not possible to make Europe. How could the Italian prime minister manage to do what the ECB president has failed to do, namely launch a calm and rational discussion on economic policy... in which the Germans finally understand that they will not get away with their same old neoliberal and monetarist platitudes and mercantilist ambitions. All those who still have their heads screwed on straight can only cheer for Mario Draghi,' writes the great German economist Heiner Flassbeck. For Flassbeck, Mario Draghi's political potential in Europe is enormous, but the resistance he will encounter along the way will also be very strong, especially in the north of the continent. Heiner Flassbeck writes about this on Makroskop.de

Poor man, I thought immediately when I heard that Mario Draghi had accepted the mandate as Prime Minister to form the new Italian government. But on reflection, I then realised that Mario, whom I have known for more than 20 years, and who may well be poor from my point of view - and perhaps from his too - probably represents a unique opportunity for Italy instead.

What country can say that it has a prime minister who has not only received broad support from the parties represented in Parliament, from right to left, but who has also amassed a unique experience both domestically and internationally. Mario Draghi has been part of (and taken responsibility for) all the main bodies dealing with the global economy, Europe and the Italian economy since the early 1990s. He took the most important position in terms of economic policy within the eurozone at a time when the Monetary Union (EMU) was on the verge of collapse, giving it a foothold at a crucial moment.

None of this, of course, can guarantee that she will be able to participate in the intrigues and conspiracies typical of politics, and successfully complete this task as well. But the potential of his political ambition is enormous, given his vast experience and knowledge on crucial issues. And in any case it is much greater than that of any other politician who has been allowed to take the helm in Rome, at least in the last 30 years.

Italy and monetary union

Anyone who has had anything to do with Italy, beyond the usual widespread prejudices - especially in Germany - will be well aware that the Italian question, the Italian problem, let us say, is a problem essentially linked to Italy's entry into monetary union. Because of Italy's special starting position, which I have described in detail in the thematic issue of MAKROSKOP - "Debt and expiation", since the beginning of the euro, the country has always been on the defensive. The simplest reason is that Italy and the other eurozone members were dying to give up their "monetary sovereignty" (which they never really had) and were ready to swallow a number of very fat (German) toads to do so.

The hope that, thanks to a large European currency area, they would be able to have an economic policy that, as in the United States, would be geared above all to the domestic needs of a large and relatively closed economy and consequently put domestic demand and employment at the centre of the central bank's efforts, was not at all unfounded at first. In the end, however, the Bundesbank, which had always focused on price stabilisation, had been replaced by an institution that, to be sure, in the literal interpretation of the treaties (and of course at vehement German insistence) was even more devoted to containing inflation as its sole central objective. But anyone who seriously considered European 'solutions' at the time was well aware that in this Europe the food could not be 'eaten as hot as it was cooked'.

Even among the signatories of the Maastricht Treaty, no one could have imagined that soon after the start of monetary union the largest country would start to 'Dutchify' itself, i.e. to live at the expense of its neighbours, as the Netherlands had already done 'with some success' in the 1980s with its policy of wage dumping. That this was done by a red-green German government, of all people, a government that stumbled on this 'way out' because of its complete economic incompetence, was a coincidence. But the fact that it blocked the economic development of the whole of Europe in this way can be considered a truly unique experience in Europe.

Germany, among other things, despite its rather superficial successes, ruined forever its own successful economic system, which since the 1970s had become the anchor of all European monetary alliances, as it effectively made it impossible for the country to achieve a high level of employment without a current account surplus.

For Italy, this process was undoubtedly fatal, because by signing the Maastricht Treaty it put on a fiscal suit that would have been bearable only if Italy had been a great export success and/or if growth had been driven by business investment in an overall flourishing Europe. However, Germany's conduct has blocked the first and second path, because its policy of wage dumping has effectively blocked the export route for other countries in the monetary union and at the same time stifled its own domestic and European demand. All the other countries in the monetary union, in fact, had to follow this senseless model in order not to sink irreparably in their export markets.

Mario Draghi's room for manoeuvre and his biggest opponent

Mario Draghi knows this, and for this reason alone he is fundamentally different from virtually all other European politicians. He knows that he needs an expansionary fiscal policy (without European conditionality) to pull the Italian economy out of the deep depression it is in. And he knows that there needs to be a change in the competitive balance in Europe, especially if Italy and France are to have any hope of success in the long run. He also knows that his every step will be under scrutiny and that at any moment a storm could break out in the north of the continent that would sweep him away politically as well.

Draghi's great advantage is his deep knowledge of institutions. He will not fight on the wrong front. After all, given his long experience on countless committees, he knows that his most important opponent is not in Brussels but in Berlin. Above all, this is where he differs from the naive left and right who sit in their little rooms and write and blather on about neo-liberal Europe and the European Commission, without ever having seen a European or international institution up close and the real balance of power within them.

Draghi's greatest adversary will be the "hard core of the CDU/CSU", which already has in mind the reimposition of the old debt rules for the post-crisis period and is thinking of tough conditions to be imposed on anyone who wants to borrow even a single euro from Brussels.

Draghi also knows all too well, having spent much time in Frankfurt, that the sentiment in Germany among the ECB's declared opponents (including the Federal Constitutional Court with its absurd ruling on the proportionality of European monetary policy), directed at anything resembling fair treatment of European countries by the ECB, will be particularly problematic for Italy. Italy may always find itself in the position of having to rely on direct or indirect support from the ECB, given the utterly irrational mood of the 'markets'. Consequently, it will have to be very careful when discussing the ultimately inevitable question of whether and how the ECB's mandate can be adapted to modern times, even after the Coronavirus.

Draghi needs friends

Anyone facing a strong opponent will need strong friends. The new Italian Prime Minister will not succeed in his undertaking if he fails to do what all those in the monetary union who have tried to change anything so far have failed to do. He needs a strong coalition of countries that are ready to openly and openly challenge the domination and narrow-mindedness of Germany. In the last few days we can see how the Bavarian President, the Federal Health Minister and the Federal Minister of the Interior refuse to accept any warning from Brussels on the subject of open borders, and how the German President of the Commission, instead of banging his fists on the table, prefers to remain nobly silent.

Let's not delude ourselves, Europe cannot be made with this Germany. How could the Italian prime minister manage to do what the ECB president failed to do, namely launch a calm and rational discussion on economic policy in this great and self-referential Europe? A discussion in which the Germans realise from the outset that they will not get away with their old neoliberal and monetarist platitudes and mercantilist ambitions. All those who still have their heads screwed on straight can only cheer for Mario Draghi. For my part, I can only wish him with all my heart good luck!