Mario Draghi’s wildly ambitious recovery plan kicks off as the Italian economy reopens

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When he was president of the European Central Bank, Mario Draghi was credited with saving the euro. The crunch point came in 2012. Greece and Italy were on the verge of economic collapse, and he promised to do “whatever it takes” to end the crisis that could have killed the currency.

It worked, and he was honoured with the nickname “Super Mario.”

Mr. Draghi is now Italy’s unelected Prime Minister – he was appointed in February after Giuseppe Conte’s pandemic-weary government fell apart – and his new mission is just as difficult as the one he faced almost a decade ago: save the European Union’s third-biggest economy and its greatest victim of the COVID-19 crisis.

He was the ECB’s boss for eight years. As Prime Minister, he has two years to get the job done, as elections are to be held in 2023. That means he will have to gamble big and hope that the Italian pandemic, now in its third wave, doesn’t get worse. Every other EU leader is watching him – and praying that he’s successful, because Italy still has the power to wreck the European project if his grand plan fails.

It could, all the more so since the Italian – and European – vaccination campaigns are still laggards by American and British standards.

Mr. Draghi’s Save Italy effort begins in earnest early this week, when he reopens the economy and takes his EU-financed recovery spending plan, worth €220-billion, to parliament.

The reopening in itself is a huge risk and has been condemned by more than a few epidemiologists and virologists, including the University of Padua’s Andrea Crisanti, a scientist whose pandemic predictions have been largely right. “Unfortunately, Italy is hostage to short-term political interests,” he told Il Fatto Quotidiano newspaper over the weekend. “Reopening in April is epic nonsense.”

The process will see all schools reopen in low- and medium-risk yellow and orange zones but not in high-risk red zones. In yellow zones, which cover more than half the country, bars and restaurants will be allowed to offer outdoor service. Museums, cinemas and theatres will also reopen, and outdoor sporting events will be permitted.

Three more reopening stages, in May, June and July, will progressively eliminate the remaining restrictions. If all goes well, Italians will have a normal summer.

Big if.

Mr. Draghi’s plan could backfire, thrusting his economic revival into disarray. The cautionary tale is Sardinia. At the beginning of March, the island was declared Italy’s only white, or safe, zone – infections were disappearing, allowing largely unrestricted life. That happy status lasted a mere three weeks. In late March, as infections returned, Sardinia was declared an orange zone. It is now red – the highest risk.

If Italians get sloppy with physical distancing and ignore the remaining restrictions, Italy could face the same fate, all the more so since the highly contagious new variants are taking over and the vaccine rollout is underwhelming.

By Monday, Italy had fully vaccinated only 8.6 per cent of the population, according to the Bloomberg Vaccine Tracker. That’s ahead of the EU-wide figure but still way too low to keep ICUs from filling up again – or to allow a safe reopening. The infection rate remains stubbornly high; in recent weeks, Italy has reported 10,000 to 20,000 new infections a day. And the death toll is almost 120,000.

Mr. Draghi himself has called the reopening a “calculated risk.” So is his ambitious recovery spending plan. The risk is that the spending will not come with the structural reforms needed to jolt the country out of its lethargy. The economy has gone nowhere since Italy joined the euro zone in 1999.

Italy’s share of the EU’s €750-billion recovery fund, known as Next Generation EU, is the largest among the member states and will be spent on six broad areas: digitalization and innovation, including 5G; the transition to a green economy; infrastructure, such as high-speed rail lines in the south; education and research; social inclusion; and health.

Even though the spending will be monitored by the EU to ensure the money goes where it’s supposed to, the outlays will be the easy part of the plan. The reforms will be the hard bits. Every government in the past 25 years has promised to make Italy competitive and productive again, restoring the economic miracle that made the country a creative and dynamic power through the 1980s. All have failed.

Italian bureaucracy is a byzantine mess. The judicial system is a nightmare. The World Bank found that it takes on average 1,100 days to enforce a commercial contract, more than double the time in other big EU countries. The labour market is inflexible – it’s simply too difficult to hire and fire.

Mr. Draghi is the most capable leader Italy has seen in decades. His economic credentials are impeccable, and he is respected around the world. Under him, Italy has newfound credibility as a shaper of the European project. But if he thinks the country’s transformation is in the bag because of the vast EU funds coming his way and rising vaccination rates, he could be dead wrong. His reopening could prove to be fatally premature, the reforms elusive. Super Mario will have to be superhuman to finish the job in only two years.

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