What will the Draghi agenda be in economic policy?
Potential and effects with Draghi at Palazzo Chigi in Italy's relations with the European Commission. The comment by Luigi De Bellis, co-head of the Equita Research Department
The Draghi era begins. Technical-political government. To the technicians the key ministries.
Draghi has launched the new government team, with 15 "politicians" (4 M5S, 3 each for PD, FI and Lega and 1 for LEU and IV) and 8 "technicians". 7 names of the Conte government have been confirmed.
Compared to expectations, there are some more "politicians" (with a breakdown based on parliamentary strength), but the new prime minister has entrusted the key ministries to the technicians, that is, those most exposed in the drafting and management of the Recovery Plan and public accounts.
The Ministry of Economy goes to Daniele Franco, DG of the Bank of Italy and one of the top national experts in public finance.
The Ministry of Ecological Transition is born, entrusted to the physicist Roberto Cingolani (responsible for technological innovation in Leonardo), while Vittorio Colao (who has built most of his career at the helm of Vodafone) will lead that of technological innovation and digital transition. Colao, in particular, had been called by the Conte government to lead the Task Force for the restart in April 2020, but the working group was then dissolved.
The Colao plan attacked digital transformation (including broadband plan and 5G support) and energy, work, infrastructures, PA, and plans for emergence and regularization of cash / digital payments support (asset gatherers, Nexi). Even for schools and universities, the choice fell on technicians (Bianchi and Messa), as well as Justice which will be led by the former president of the Constitutional Court Marta Cartabia.
The League will hold an important ministry, that of Economic Development which will be led by Giorgetti, while Enrico Giovannini (technician), former labor minister of the Letta government, will go to Infrastructure.
Although the risk to Italian public finances remains high, we believe that Draghi's appointment as PM, his international credibility and continued support for ECB purchases drastically improve Italy's risk profile and could shift capital flows on `Italy and the EU.
Draghi's leadership will make relations with the ECB and the EU easier and closer (with Italy's interests that could receive more attention). Furthermore, Draghi is a proponent of fiscal easing to stimulate the economy and the current environment may make it easier to implement his policy.
Since the mandate to form a new government on February 3, the BTP-Bund spread has shrunk by around 25bps (from 113bps to 90bps – to the lows of the last 5 years, with the BTP yield at 0.48%), but we see room for a further reduction (with benefit above all for financial securities)
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/quale-sara-lagenda-draghi-in-politica-economica/ on Tue, 16 Feb 2021 06:24:02 +0000.