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EXPERT COMMENT

The likely appointment of Draghi as Italian prime minister has been warmly welcomed, but maintaining the political support he needs is going to be a challenge.

As former European Central Bank (ECB) president Mario Draghi prepares to take over as Italy’s prime minister, the choice by the country’s president of a man widely seen as a ‘technocrat’ has been warmly welcomed in financial markets and European policymaking circles.

Since the January collapse of the previous government which was mainly supported by a political coalition between the Five Star Movement (M5S) and centre-left Partito Democratico (PD), inconclusive negotiations among the political parties over forming a new cabinet has left Italy stuck in a political and economic stalemate.

But even when the prospects of Draghi, a former governor of the Bank of Italy, leading a new cabinet seemed bleak, the markets still sent a unanimous verdict – they effectively blessed the new government by sending Italian government bond yields down.

Draghi’s return is also welcomed in Brussels where his strong European resumé relieves concerns Italy might not be able to effectively tap into the economic recovery money available, and raises hopes the country can institute the kind of reform programme many have called for.

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