Draghi in the spotlight as Italy’s presidential election approaches

Italian Prime Minister Mario Draghi attended the year-end press conference.

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Italy is back on the radar of many investors as the upcoming presidential election threatens the political stability we witnessed last year.

In two weeks, the country’s legislators and regional delegates will decide who should become the next president as Sergio Mattarella’s term expires on February 3. 24.

why does it matter?

The main issue is whether Mario Draghi, the country’s current prime minister, will be chosen as the new president.

The appointment of Draghi, the former head of the European Central Bank, into national politics about a year ago, put an end to several years of political turmoil in the country. The yield on Italian 10-year bonds fell to their lowest level in 2021 shortly after news that Draghi was likely to be the new prime minister.

His government, consisting mostly of politicians from different parties and some technocrats, placated the markets due to its parliamentary support and reform plans.

However, Draghi’s possible departure from the government threatens this economic and political stability.

Fears of economic and political stability

Analysts at Goldman Sachs said in a note Thursday that Draghi’s departure “will lead to uncertainty about the new government and the effectiveness of its policy.”

“Given the divergent interests between parties in Parliament and the usual length of time it takes to form a new government, we are more concerned than unanimous that this scenario may result in delays in implementing the Recovery Fund and related reforms,” they said. The Recovery Fund refers to the 191.5 billion euros ($216.68 billion) the country is set to receive from the European Union to deal with the economic shock from the coronavirus pandemic.

Money payments are associated with the implementation of previously promised repairs. Experts view both sides as pivotal to boosting the Italian economy, which has been suffering for many years.

Wolfango Piccoli, co-chair of consultancy Teneo, also noted the short-term risks to the economic recovery if Draghi becomes president.

“Regardless of whether Draghi is elected president or not, it is unlikely that Italy will hold parliamentary elections a year ahead of schedule. However, it is likely that the inauguration of a new prime minister, the formation of a tumultuous new government and the current heterogeneous ruling coalition may It undergoes partial remodeling.”

The current parliamentary term ends in 2023 and Italians will then head to the polls to choose a new parliament and government, if no early elections are held in the meantime.

Draghi indicated in his year-end press conference that he was ready to take over the country’s presidency.

“what in [it] For Mario Draghi is that he will be able to secure Italian stability in the medium to long term,” Guido Podrato, an economist at Berenberg, told CNBC’s “Street Sings Europe” on Thursday.

“He also wants to push political parties to actually be held accountable,” he added [for] governmental work “.

How will it work?

It is not uncommon for those wishing to become President of Italy to express their willingness, but not to formally announce their candidacy.

Other potential candidates in the competition include: Silvio Berlusconi, the former prime minister who was temporarily banned from holding public office after being convicted of tax fraud in 2012; Giuliano Amato, who served as prime minister twice; Minister of Justice, Marta Qurtabieh. former Speaker of the Chamber of Deputies Pier Ferdinando Cassini; and Commissioner for Economy and former Prime Minister Paolo Gentiloni.

The body of ‘senior electors’ that will be elected [the] The next president is currently composed of 1,007 members (58 regional delegates yet to be appointed and 949 legislators),” said Piccoli of Tinio, although the final number could become 1,008 due to the upcoming by-election.

In the first three rounds of voting, a two-thirds majority is needed to elect a new president. After that, a simple majority becomes enough to choose a new head of state, Piccoli explained.

“Big Voters” may be in for a long process with rounds of voting expected to take 6 hours due to pandemic restrictions.

“Intensive political maneuvering behind closed doors characterizes the election of a president because the whole process is run by political parties. Past experience also indicates that if no clear candidate emerges in the first round of voting, the same voting dynamics often create new alliances or consensus around the names that , in principle, only the best secondary options were considered,” added Piccoli.

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