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The Eternal Return of “Technical Government” in Italy

Several commentators have taken Trump’s departure from office to mean that the so-called populist tide is ebbing and that we are witnessing the return to a pre-2016 “old normal.” In fact, Joe Biden’s cam­paign implicitly—and sometimes explicitly—promised the resto­ration of Obama-era technocracy, returning the reins of power to the “experts,” as seen in his choice of former Federal Reserve governor Janet Yellen for the position of Treasury secretary. Indeed, Biden seems to have opted for an administration dominated by “conventional, experienced, and broadly boring technocrats,” leading the Washington Post to boast, with scarcely disguised glee, that “the technocrats are back.” Are we witnessing a new “revolt of the elites” against the “populist” interregnum of the past half decade? Possibly.

We should be wary of simplistically pitting technocracy and popu­lism against each other, however: in fact they feed off each other, and not only that. As Christopher J. Bickerton and Carlo Invernizzi Ac­cetti argue in a fascinating new book, “there is also an important dimension of affinity—and indeed complementarity—between popu­lism and technocracy, which implies that they can go hand in hand and be combined with one another.” Bickerton and Acetti suggest the notion of technopopulism as “the new structuring logic of contemporary democratic politics”—one that combines populist claims to represent “the people” as a whole and technocratic claims to possess the necessary competence for translating its will into policy. Biden’s mixture of technocratic expertise and MAGA-like “buy American” rhetoric is a telling example. In many ways, technopopulism exemplifies the contemporary crisis of democracy: on the one hand, it feeds on a widespread sense of dissatisfaction with the quality of democratic representation; on the other, by widening the existing chasm be­tween society and politics, it further exacerbates that sense of dis­satisfaction, in a dangerous feedback loop.

If there is a country that epitomizes the perils of technopopulism, it is Italy. For the past three decades, the country’s politics have essentially been defined by these two pillars—technocracy and popu­lism—often in combination with each other, with disastrous outcomes. What better example of this than the fact that arch technocrat and former European Central Bank (ECB) president Mario Draghi was sworn in as the new Italian prime minister earlier this year, following Matteo Renzi’s decision to pull the plug on the Conte government? Draghi is now at the helm of a technocrat-led government—or “technical government,” in the Italian political jargon—that enjoys near-unanimous parliamentary support, including from the two (formerly?) “populist” parties par excellence, the Five Star Move­ment (M5S) and the League.

Virtually everyone seems to agree: if anyone can “save” Italy, it’s Mario Draghi. He is, after all, the man widely credited for “saving the euro.” This discussion, however, omits a crucial fact. Even though Draghi is often presented as an “outsider” to Italian politics, Italy is what it is today largely as a result of the policies sponsored by Draghi himself—both directly, in his capacity as chief of the Italian Treasury in the 1990s, as governor of the Italian central bank in the late 2000s, and then as president of the ECB over the past decade; and indirectly, as a leading representative of the class of neoliberal technocrats that has ruled the West for the past thirty years. Indeed, Italy’s post-1990s history is, for better or for worse, inextricably bound to Draghi. So it is fair to say that whatever one believes Italy’s problems to be, Draghi had a part in their making. This is especially true if, as I have argued before in these pages, one regards Italy’s crisis as a crisis of the post-Maastricht order of Italian capitalism, based upon fiscal austerity, welfare retrenchment, wage compression, and privatization, of which Draghi is one of the chief architects.

Let us begin by looking at the notion of “technical government,” which most non-Italian readers are likely to find baffling. Indeed, to my knowledge, the concept doesn’t exist in any other Western coun­try. The basic idea is that in moments of deep crisis only “experts,” supposedly untainted by political partisanship and unburdened by the complications of parliamentary politics, can be trusted to make the “right” and “necessary” decisions, painful and costly as they may be. It’s a concept that, alas, has a long-running history in Italy, and which harkens back to the fraught relationship that the country’s economic elites have always had with mass social democracy—and how they sought to resolve this tension by resorting to self-imposed “external constraints” of various natures.

The Birth of the Vincolo Esterno

Beginning in the late 1960s and throughout the 1970s, Italy’s ruling elites were faced with an increasingly militant and “ungovernable” working class, which was also linking up with new student-led protest movements. In those years, Italy’s rates of industrial conflict were the highest among all advanced countries, and its state-centric, redistributive political economy (grounded in the country’s socialist-leaning constitution) was deeply incompatible with the emerging neo­liberal paradigm. Elites thus concluded that only by “tying the hands” of government via a political-economic straitjacket—an external con­straint or vincolo esterno—could they hope to achieve their objectives. Their aim was essentially to “break the back” of the working classes and curb their bargaining and distributive demands, while spearheading those neoliberal “reforms” for which there was very little popular consensus.

This wasn’t just an Italian issue, of course. Elites were voicing similar concerns throughout the West. Consider the infamous “elite manifesto” of 1975—The Crisis of Democracy, written by Michel Crozier, Samuel Huntington, and Joji Watanuki—which explicitly proposed reducing the bargaining power of labor and restricting the spaces for mass democracy as a response to what was perceived to be the “excess of democracy” brought on by the postwar full employment regimes. In Italy, this elite backlash was brought to its most extreme conclusions in the form of European economic and monetary integration, and Draghi was a key player in this process.

The vincolo esterno would reach its apex in the 1990s, with the signing of the Maastricht Treaty and the creation of the single currency. This, however, was simply the culmination of a decades-long process. Indeed, many important changes that happened during the 1970s and throughout the 1980s—particularly with regard to European integration and the growing power of technocratic appa­ratuses such as the Bank of Italy (the country’s central bank)—prepared the way for the turning point of the 1990s.

The first step in the consolidation of the external constraint was the creation, in 1979, of the European Monetary System. The EMS essentially anchored the currencies of all other participating states—Italy, France, Denmark, Belgium, Luxembourg, Ireland, and the Netherlands—to the deutsche mark and, consequently, to the “anti-Keynesian” and anti-inflationary stance of the Bundesbank. The logic of “competitive disinflation” hardwired into the EMS allowed na­tional politicians, now “deprived” of the tool of competitive devaluation, to present wage compression and fiscal austerity as the only means through which to restore a country’s competitiveness. In this sense, the EMS was a means to institutionalize disinflation. None other than future Italian president Giorgio Napolitano, at the time a Communist MP, noted in a 1978 speech in parliament that Italy’s decision to join the EMS was simply a ploy to force trade unions to accept “drastic restrictive policies.”

The Rise of the Technocrats

Events would prove Napolitano right. Throughout the 1980s, the Italian government fostered wage moderation by revising the scala mobile inflation indexation mechanism (which would ultimately be terminated in 1992). This was done not by confronting labor directly but by essentially appealing to the external constraint of the EMS—a classic example of the depoliticizing logic of the vincolo esterno.

More importantly, Italian elites understood that the external con­straint of the EMS would set in motion a path dependency that would make the logic of the external constraint increasingly self-reinforcing. So just a few years later, in 1981, came the infamous “divorce” between the Bank of Italy and the Treasury, which put an end to the partial monetary financing of the government deficit by the central bank and initiated a drastic monetary tightening. Once again, this was presented as “an inevitable consequence” of Italy’s decision to enter the EMS, as Italy’s economic minister at the time put it, since mem­bership in the EMS implied that high-inflation countries such as Italy needed to bring down inflation by pursuing restrictive monetary policies and to attract foreign capital by raising interest rates.

The “divorce” dramatically altered Italy’s monetary-fiscal policy regime. If, prior to the separation, the role of the central bank had been that of supporting the autonomous fiscal policy decisions of the government, through a statutory obligation to purchase all the Treas­ury bonds that were not purchased by private investors, under the new regime, as Mario Draghi would approvingly note years later, the role of the bank became that of pursuing the independence of mone­tary regulation from political authorities. It sought to harmonize public spending with the target of a balanced budget and to keep wages in line with low inflation and price stability.

Thus the “divorce,” by providing a crucial first step in the insula­tion of monetary policy from democratic control, and making the government increasingly dependent on capital markets for its finan­cing needs, partially anticipated the transfer of monetary sovereignty to the EU in the 1990s. Amazingly, given the calamitous implications of the decision, the “divorce” was never debated in parliament but was implemented through an exchange of letters (“an open conspiracy,” in the words of one of the protagonists) between the governor of the Bank of Italy, Carlo Azeglio Ciampi—one of Draghi’s mentors—and the Treasury minister, Beniamino Andreatta.

The two would later admit that the move was aimed primarily at constraining the fiscal action of governments and reducing the latter’s role in the economy, as well as further consolidating the self-reinforc­ing logic of the vincolo esterno, in the knowledge that reversing such a decision further down the road would prove very difficult. We can only assume that the thirty-four-year-old Draghi, who in 1981 had just been appointed professor of economic and monetary policy at the University of Florence, would have agreed. After all, it was Rüdiger Dornbusch, Draghi’s macroeconomics professor at MIT and future mentor, who described the project of his generation as being the taming of “democratic money.”

One of the most pernicious consequences of the “divorce” was its devastating impact on Italy’s public debt dynamics. Resorting to financial markets to finance the budgetary deficit led to the rise of interest rates and therefore increased the cost of debt, leading to the “explosion” of Italy’s debt-to-GDP ratio during the 1980s, despite a reduction in the government deficit. The real price, however, would be paid in political rather than economic terms, as the influence (and expectations) of financial creditors and the rising debt stock would be exploited in the early 1990s to begin a policy of permanent austerity, as well as to justify the transfer of monetary sovereignty to the EU, even though Italy’s monetary self-castration, a decade earlier, was the main reason why the public debt had increased so dramatically in the first place.

The 1980s saw a deepening of the process of European supranational integration. The next stage in the consolidation of the vincolo esterno came in 1986 with the Single European Act, which mandated the gradual abolition (by 1990) of all capital controls throughout the European Economic Community (EEC), the precursor to the EU. These controls had been the primary basis for any sense of cur­rency stability in Europe until that moment—but this was overlooked by the Delors Report of 1989, which was the logical extension of the single market legislation and which would act as a blueprint for the Maastricht Treaty of 1992.

Throughout this period, the neoliberalizing vanguard came from the ranks of what Adriano Cozzolino (a researcher at the Università degli Studi della Campania and author of the brilliant study Neoliberal Transformations of the Italian State, which I’ve drawn on heavily in writing this article) calls the “technocratic collective intellectual.” This was a small elite of experts located within the technocratic apparatuses of the state—the Bank of Italy and the Treasury—which “provided for neoliberal expertise to guide the process of capitalist restructuring and the legitimation of such a process thanks to the ‘symbolic capital’ (in Bourdieu’s words) of technocratic expertise.” That was nothing, however, compared to the power the technocrats would accrue in the 1990s.

The End of an Era

If the 1980s had been a decade of gradual and largely silent neoliberal restructuring in Italy, the 1990s would prove to be a decade of dra­matic—almost “revolutionary”—change. The combination of two developments—the Tangentopoli (“bribesville”) corruption scandal in 1992 and the speculative attack on the lira in that same year—pre­cipitated a set of radical political and economic reforms that would have been unthinkable just a year earlier.

Tangentopoli refers to the network of payoffs and corrupt prac­tices that primarily involved two of the main parties of the time, Christian Democracy (DC) and the Socialist Party (PSI), which were all but wiped out of existence. The scandal led to the disintegration of the existing party system, since the third main party of the time, the Communist Party (PCI) had already self-imploded the previous year on the heels of the collapse of the Soviet Union. The PCI refashioned itself as the Party of the Democratic Left (PDS), purging any refer­ence to socialism in its name. This crisis informally marked the transition from the so-called First Republic to the Second Repub­lic—one, as we will see, that would be dominated by technopopulist logic.

Concurrently, Italy was forced to abandon the European Monetary System of semifixed exchange rates. The introduction of a further stiffening of the exchange rate regime in 1990, coupled with the lib­eralization of capital flows that same year, led to a loss of competitiveness, current account deficits, and declining confidence in the lira. In 1992, following a hike in German interest rates, Italy experienced a massive outflow of capital, which eventually forced the country to exit the ESM later that year. This was described by Italy’s technocratic establishment as a national failure, attributable to the inherent “weakness” of the Italian economy.

In fact, the collapse of the ESM simply demonstrated that a system of fixed (or even tightly linked) exchange rates between economies that were disparate in structure and performance was always bound to fail, especially in the context of mobile capital. The fact that the problem lay with the EMS itself, and not with Italy, appears rather obvious in light of the results. During the brief period that Italy allowed its currency to fluctuate—between 1992 and 1996, when Italy reentered the EMS as a precondition for joining the single currency—its economy, on the back of booming exports, grew at a rate close to 3 percent, which was to become a rarity in the following years.

For Italy’s elites, however, monetary integration had always been primarily a way of redistributing power within the country, even at the cost of weakening the economy as a whole. Elsewhere, I have described this model as “a form of comprador capitalism—a semi-colonial regime in which the country’s ruling classes essentially allied with foreign interests in exchange for more favorable domestic class relations.” Thus, the primary concern of the country’s elites, following Italy’s exit from the EMS, became that of reestablishing the vincolo esterno as soon as possible, regardless of the macroeconomic consequences, lest they might be forced to actually take responsibility for their policies.

Luckily for them, the situation couldn’t have been more propitious. Indeed, for the technocratic elite revolving around the Bank of Italy, which had been pursuing the European external constraint and the stealth neoliberalization of the Italian economy for more than a decade, the early 1990s represented a “perfect storm.” The Tangentopoli scandal and subsequent delegitimization of the existing party system; the traumatic exit from the EMS; a deadly mafia bombing campaign, which in 1992 killed the well-known magistrates Giovanni Falcone and Paolo Borsellino—all combined to create a golden opportunity to further tighten the noose of the vincolo esterno.

Cozzolino aptly describes “the changes of the 1980s as a case of war of position, slow and incremental, while the transformations of the early 1990s [were] a case of war of movement, fast and dynamic, led in particular by technocrats in the state.” In the window of opportunity opened by the political crisis, Giuliano Amato, law professor and PSI member, became prime minister of a quasi-techno­cratic government in 1992, soon followed by the “full technocratic” executive of Carlo Azeglio Ciampi in 1993. Increasingly, “technocrats and university professors began to fill the more relevant positions within the cabinet.” Just a few years later, it would be the turn of Lamberto Dini, prime minister between 1995 and 1996.

For the first time, neoliberal, technocratic intellectuals, who had been at the forefront of monetarist and neoliberal restructuring since the late 1970s, no longer limited themselves to providing political and ideological support to these processes from inside the bastion of the Bank, but actually began supplying “personnel” to national parties and assuming direct control of key government positions. Indeed, the leading figures of the “technical governments” of the 1990s were all more or less directly linked to the Bank of Italy or to the Treasury’s “technical” department, the General Directorate.

Guido Carli, Treasury minister between 1989 and 1992, was a former governor of the Bank of Italy (1960–75). Ciampi, prime minis­ter of the first full technocratic government in Italy in 1993–94 and Treasury minister for several years in the second half of the 1990s, was also a former governor of the central bank (1979–93). Dini, prime minister in the second full technocratic government (1995–96), was a former director general of the Treasury, while the director general of the Treasury during this crucial period—from 1991 to 2001—was Mario Draghi himself. As Cozzolino writes:

Generally, the technocratic nature of the new governments [of the 1990s] made it possible for a series of measures to be passed that, through the usual institutional channels, would have met with widespread dissent and been extremely costly in political terms. In a context of unprecedented weakness of parties, tech­nocrats managed to strengthen the powers of the executive branch, especially by resorting to decrees. In a few months, such governments implemented an impressive series of reforms concerning privatization, the pension system, the labour mar­ket, industrial relations, and budget consolidation.

In the narrative of the technocratic elite, the economic crisis wasn’t the result of the flawed decisions made in the previous decade, but rather the consequence of a congenital (social, economic, political, cultural, even anthropological) “backwardness” of the Italian politi­cal‑economic system. From this perspective, Italy’s “modernization” necessarily passed through the country’s anchoring to “Europe”—a classic example of technocratic populism. It is therefore hardly sur­prising that, despite the failure of the EMS, Italy undertook to join, within a few years, the most inflexible of exchange rate arrangements: a common currency.

The Maastricht Treaty: Vincolo Esterno on Steroids

Against this background of widespread economic, social, and political turmoil, the Maastricht Treaty was signed in February 1992, entering into force in November 1993. The treaty imposed much tighter con­straints than anything introduced before, with central banks explicitly prevented from lending to governments as a matter of treaty obligation. Most states also agreed to adopt the euro as their official curren­cy, and to transfer control over monetary policy from their respective central banks to the ECB by 1999 as part of the creation of the Economic and Monetary Union (EMU).

Interestingly, as far as Italy was concerned, the entire deal had been negotiated behind the scenes over the course of the preceding years by the same technocratic elite that, as a result of the 1992 crisis, had taken center stage. The key negotiators were a small number of top-level technocrats: Tommaso Padoa-Schioppa from the Bank of Italy, Guido Carli, Treasury minister, and Mario Draghi, director general of the Treasury and lead negotiator for the Italian side. Over­all, the total cast of personnel closely involved in the EMU negotiations, the most important political-economic development of Italian postwar history, numbered no more than sixteen. As Kenneth Dyson and Kevin Featherstone write, the negotiation of the Maastricht Treaty provisions on EMU “was largely driven by a small tech­nocratic elite, with limited ministerial involvement” and with a single overarching imperative: “to maintain Italian participation at the heart of the European integration process,” based on the technocrats’ “shared . . . belief in the need for externally-imposed economic disci­pline.”

This was to be achieved by transferring national prerogatives to the supranational institutions of the EU and by redistributing power between domestic actors—namely to themselves. The technocrats were well aware of the fact that the vincolo esterno would “strengthe[n] their institutional position, their information advantage and their ideological legitimation” vis-à-vis other domestic actors, namely the political parties, since “EMU would in effect tie the hands” of demo­cratically elected representatives. The technocrats’ cause was helped by the fact that the relevant minister, Guido Carli, as well the chief negotiator, Mario Draghi, both fully espoused the vincolo esterno thesis. As Dyson and Featherstone note, “[a]s a technocratic, non-party minister himself, in his soul [Draghi] believed in EMU as a vincolo esterno,” without which “the politicians could not be relied upon to accept long-term budget discipline.”

The Italians, however, played a marginal role in a negotiation that was largely dominated by the Franco-German axis. Simply put, for the Italian negotiators, any agreement would have been preferable to no agreement, given their overarching imperative of enforcing the vincolo esterno, whatever the cost to the country as a whole. From the technocrats’ perspective, the harsher the rules of EMU, the better, since they viewed their domestic power as being inversely proportional to that of the Italian state as such. This helps explain why the Italian side ended up accepting the Treaty’s provisions for exceedingly tough fiscal convergence criteria, in terms of deficit and debt-to-GDP ratios, which were especially penalizing for Italy.

The technocrats were also aided by the strong degree of support for European integration among the Italian public and the fact that the leading ministers at the time, Giulio Andreotti and Gianni De Michelis, both accepted the general ideal of building “Europe” and assumed Italian participation within it. Indeed, the treaty was politi­cally uncontroversial. The Maastricht case, however, raises the ques­tion of the extent to which the relevant politicians understood the implications of the agreement being reached. According to Carli, the “Italian classe politica did not realize that by agreeing to the [Maas­tricht] Treaty, it put itself in the position of already accepting a change of such magnitude that it would hardly leave it unscathed.” In hindsight, the politicians appear to have been shockingly oblivious to the fact that the technocrats were using the EMU not only to accrue power but to transform the very nature of the Italian state, as would become apparent in the coming years.

As the late, great British economist Wynne Godley wrote pres­ciently in 1992, “the power to issue [one’s] own money, to make drafts on [one’s] own central bank, is the main thing which defines national independence.” Therefore, by adopting the euro, member states, particularly the more subaltern ones, would effectively acquire “the status of a local authority or colony.” In this sense, the establishment of the euro can be considered the end point of the European and Italian elites’ decades-long war on sovereignty and democracy. The scope of the European treaties, moreover, extends well beyond fiscal and monetary policy. The texts set down the primary legal structure of the European Union’s economic policy, which essentially embedded neoliberalism into the very fabric of the European Union, by codifying the four capitalist freedoms par excellence—the free move­ment of goods, services, capital, and persons—and placing huge bar­riers in the way of state intervention in the economy.

It would be a mistake, however, to understand the vincolo esterno as an infringement upon the autonomy of nation states by an ill-defined supranational “European establishment” (though this might indeed be the case in some instances). On the contrary, the vincolo esterno should be understood first and foremost as a process of self-imposed diminution of sovereignty by national elites aimed at con­straining the ability of popular-democratic powers to influence eco­nomic policy, thus enabling the imposition of neoliberal policies that would not have otherwise been politically feasible.

In this sense, the EU’s “economic constitution”—and the single currency in particular—can be said to embody what Edgar Grande defined as the “paradox of weakness”: national elites transfer some power to a supranational policymaker (thereby appearing weaker) in order to allow themselves to better withstand pressure from societal actors—first and foremost labor—by testifying that “this is Europe’s will” (thereby becoming stronger). As Kevin Featherstone, a strong supporter of European integration, put it, “[b]inding EU commitments enable governments to implement unpopular reforms at home whilst engaging in ‘blameshift’ towards the ‘EU,’ even if they them­selves had desired such policies.”

Thus, in the Italian context, Maastricht should be understood as the tool through which Italy’s ruling classes aimed to radically trans­figure Italy’s political-economic model—a model which, for all its failings, had worked quite well in the previous decades (in the 1970s and 1980s, Italy’s average annual growth rate was among the highest in Europe). In his memoirs, Guido Carli, Italy’s highly influential Treasury minister from 1989 to 1992 and one of Mario Draghi’s mentors, made no secret of the fact that “the European Union represented an alternative path for the solution of problems which we were not managing to handle through the normal channels of govern­ment and parliament.” In his own words:

The European Union implies . . . the abandonment of the mixed economy, the abandonment of economic planning, the redefini­tion of the modalities of composition of public expenditure, the restriction of the powers of parliamentary assemblies in favor of government . . . the repudiation of the concept of free social provisions (and the subsequent reform of healthcare and social security systems) . . . the reduction of the presence of the state in the financial and industrial systems.

It is clear that Carli understood the European Union first and foremost as a way to spearhead nothing less than the wholesale transformation of Italy’s economy. Such a transformation would not have been possible, or would have been extremely difficult, without the self-imposed external constraints created first by Maastricht and then by the euro.

Risanamento: Atoning for Italy’s Sins

The Maastricht Treaty set in motion a phase of intense reform activism, initially at the hands of the first wave of “technical governments” and then at the hands of the center-left governments of the late 1990s and early 2000s. The new buzzword became risanamento (rebalancing)—specifically of the country’s public finances, described as “out of control” (though this was not the case), but also of the economy and society as a whole. So began a policy of permanent austerity and wage moderation, labor market reform, and privatization. Risanamento, Cozzolino writes, “can be conceived as the back­bone of the Italian political economy from the early 1990s. . . . It is not only a political economy strategy but also a cognitive framework that regards, directly, Italian identity.” It legitimized the policy of permanent fiscal restraint not only “as a technical, neutral and un­avoidable necessity, but also as a pathway eventually leading to a better and more dynamic-cum-stable society.” He adds:

The memory of the conflicts of the 1960s and 1970s, as well as of “fiscal instability” and growing public debt, [was] exploited by state representatives to pursue a widespread cultural battle revolving around the ordoliberal “culture of stability” [and] to construct the commonsensical imaginary of endemic Italian instability and, accordingly, the necessity to introduce south of the Alps the culture of stability typical of the north of Europe. [In this sense] European integration . . . played a fundamental cognitive and discursive role in representing the external anchor to finally stabilize the country. This explains the generally strong support for European integration in the 1990s and 2000s.

Again, a perfect example of technopopulist logic. As a result of ris­anamento, beginning in 1992, Italian governments started to achieve permanent surpluses in the primary budget (i.e., net of interest) through massive cuts in public expenditures. These surpluses contin­ued almost uninterrupted until 2020, amounting to the largest and longest fiscal consolidation in the world of the past thirty years. Meanwhile, wage moderation turned into an ordinary instrument of political economy. In fact, between 1992 and 2002, according to the OECD, real wages in Italy decreased by 5 percent, marking the third-worst performance within all OECD countries: a wage compression without precedent in the postwar history of the country and also in comparison to other European countries. Key “structural reforms” included that of the pension system and of labor market regulations, which introduced an array of temporary employment possibilities to improve “flexibility.”

The mass privatization of state assets and public-owned industries—started by the Amato and Ciampi governments and then con­tinued by the governments of the center-left and center-right there­after—was another key dimension of the new post-Maastricht political-economic regime. The combined effects of these policies would have disastrous economic and social consequences, triggering economic stagnation as well as declines in investment and productivity, unemployment, precaritization, and growing inequalities, under­mining the social bases of Italian democracy and laying the groundwork for the current phase of permanent crisis and instability.

Draghi played a crucial role in this entire process. Not only was he Italy’s lead negotiator for the Maastricht Treaty, but in his capacity as director general of the Treasury, he was one of the main proponents of fiscal austerity and the privatization of Italy’s state-owned compa­nies. He directly oversaw the privatization of companies such as Telecom (Italy’s telecommunications company), Enel (Italy’s national electricity utility), and IRI (Italy’s massive public holding company, spanning a wide array of key sectors, including steel, shipping, engi­neering, electronics, informatics, robotics, aeronautics, and consumer electronics, among others), as well as commencing the privatization of Italy’s then mostly public banking system.

In an infamous 1992 speech on board the HMY Britannia, in front of the crème de la crème of the Anglo-American investment world, he acknowledged that mass privatization was “a political decision that shakes the foundations of our social-economic order and redraws the borders between the public and private sphere—borders whose exist­ence has not been questioned for nearly fifty years.” He also noted the importance of the vincolo esterno in achieving this, adding that this process, whether Italians liked it or not, was “inevitable because of European integration,” not only because of the EU’s anti-state-aid rules, but also because privatizations were portrayed as an essential element of Italy’s debt-reduction strategy. Indeed, the existence of a link between EMU entry and privatization has been noted by several scholars, and there is an explicit trace of it in official government documents, as well as in the accounts of the protagonists. Recently, former prime minister Romano Prodi described the privatization pro­cess as a European “obligation.” While at the Treasury, Draghi also employed a large variety of derivatives and structured financial prod­ucts to mask the reality of Italy’s deficit and debt levels in order to comply with Maastricht’s fiscal criteria, earning the country the title “Enron of the European Union.” Many of these contracts subsequently backfired, costing the country tens of billions of euros.

Maastricht as a State-Building Project

It is important to understand that the “reforms” associated with the post-Maastricht political-economic regime—fiscal austerity, wage moderation, and pro-market liberalizations and privatizations—went well beyond a project of economic transformation. Rather, they should be understood first and foremost as a political project aimed at radically transforming the very nature of the Italian state. As Cozzolino writes, the Italian case “can be conceived as a unique case of transition from [one form of democracy to another], namely from a regime based on the centrality of the parliament to one dominated by executive powers in which the legislature performs a marginal role,” thus insulating policymaking from democratic processes.

An example of this is the technocratization of budgetary procedures, through the creation of a “super-ministry for the economy” specifically tasked with managing the economy in compliance with the fiscal obligations of the EU and reducing the oversight role of the national parliament. Technocratization, however, is only one aspect of a wider process of state reconfiguration involving the strengthening of executive powers at all levels under the mantra of “governabil­ity”—presented as a necessary precondition for the swift and efficient implementation of neoliberal policies. Other crucial fea­tures of the “executivization” of the Italian state were the introduction of a majoritarian electoral system as well as the dramatic increase in executive-sponsored legislation, which in turn was facilitated by a series of key reforms.

The main innovation in this respect was the reform, in 1988, of the “confidence question,” allowing the executive to impose the confidence question on the parliament in relation to specific law proposals, so as to reduce the risk of a parliamentary rejection of the bill and fast‑track the approval thereof, with hardly any parliamentary scruti­ny or debate. Another aspect of the executivization of the Italian state was the dramatic rise in the use of “emergency” legislation known as decree-laws. Though formally allowed only in extraordinary cases of necessity and urgency, since the early 1990s the use of emergency decrees has become a “normal” tool of lawmaking, well beyond (and against) the cases provided for in the constitution. Tech­nocratic executives resorted to decree-laws on an ordinary basis to enact measures in a great variety of policy domains, especially in the fields of fiscal policy and structural reforms. As a result of these developments, “the chief executive gained control over every area and instrument of policymaking,” Cozzolino writes.

The 1990s were also marked by the rise of the EU as a lawmaking power in its own right, responsible for the creation of a massive amount of legislation—the so-called acquis communautaire—which is then transcribed into national law, usually by resorting to so-called legislative decrees, another form of “emergency” legislation that over the years has become commonplace. Indeed, the EU has now become Italy’s principal source of legislation. The use of emergency legal mechanisms exploded during the global crisis (2008–11), to the point, Cozzolino notes, that today it is not an exaggeration to say that “the national parliament has no relevant decision-making power regarding political economy policy domains or policymaking more broadly. Actually, it mostly ratifies executive decisions.”

Another crucial aspect of the executivization of the Italian state has been the growing importance of the president of the Republic, to the point that Cozzolino speaks of an institutional transition, beginning in the 1990s, “from a parliamentary regime to a de facto (that is, in absence of constitutional changes) presidential regime.” This would become evident during the events leading up to the formation of the Monti government, in 2011, and also during the formation of the “populist” government alliance between the Five Star Movement and the League, in 2018. This is how Cozzolino sums up the astonishing state-building project pursued by Italy’s techno-political class during the 1990s and beyond:

[T]he construction of the neoliberal state put forward an idea of state as modelled on the culture and ideology of the free market economy, depoliticizing the agency of state institutions and excluding the possibility to pursue different political economy alternatives. Hence, besides the formal continuity of legal and constitutional order between [the postwar regime and the post‑Maastricht one], neoliberal hegemony has substantially refounded the state on new cultural, ideological and material bases.

Arguably, this would never have been possible without the vincolo esterno of the EU. For starters, in strictly institutional terms, the defining aspect of this process of executivization has been the transfer of key policy tools from the national level, where a certain degree of democratic control can always potentially be exercised, to the supra­national institutions of the EU, which are undemocratic by design. Moreover, to the extent that certain areas of policymaking, such as budgetary policy, are formally left in the hands of national governments, the latter are not only subject to strict rules, but also to the close surveillance and monitoring of the European institutions, especially after the 2011 crisis. This, in turn, offers the justification for further centralizing and technocratizing the decision-making process­es at the national level, in a self-reinforcing feedback loop. As Lukas Oberndorfer writes, “[e]ven when there is no direct control, economic policies are ‘surveilled’ by European and international financial institutions and thus are subject to a neoliberal ‘self-rule.’”

EMU, however, also offered a more symbolic justification for these policies, and for the wider transformation of the Italian state. Throughout the 1990s and beyond, notes Cozzolino, the EU was “not only portrayed, by Italian state representatives, as a constraining factor on the national political economy but also as a superior stand­ard of market civilization. Above all, ‘Europe’ became a means to achieve the permanent stabilization of the Peninsula . . . rescuing Italy from backward southern standards.” Indeed, accession to EMU was portrayed as a process that would jump-start a quasi-anthropological evolutionary leap in the Italian population.

Even though the specific topic is beyond the scope of this article, it is interesting to note that this messianic-like support for European integration came, in Italy, mainly from the Left, leading to the emergence of a peculiar strand of neoliberal discourse that Cozzolino calls neoliberal-progressive Europeanism. He describes the latter as a combination of neoliberal confidence in the free market economy and ordoliberal obsession with fiscal stability, coupled with a vision of “Europe” as intrinsically progressive, dynamic, and modern. Euro­pean integration was thus conceived as the catalyst to modernize and stabilize Italy’s “backward” economy and society, and set the country on the path of democracy and prosperity. Following the historical defeat of “real socialism,” this became the defining identity of the post-1990s Italian Left, all the way up to its latest incarnation, the Democratic Party (PD).

In summary, the transformation of the Italian state in the neo­liberal post-Maastricht epoch has entailed a process of centralization of power (despite, or better as a result of, the overall weakening of the state as a whole—the aforementioned “paradox of weakness”), a marginalization of democratic institutions, and the overall strengthening of executive powers within the EU’s institutional architecture. This state of affairs has only gotten worse over the past decade, with the EU itself becoming increasingly authoritarian, and even breaking away from elements of formal democracy, due to the growing discretionary powers of its executive actors and the ease of employing exceptional legal practices. Once again, Mario Draghi was at the forefront of these developments.

A Monetary Coup

In 2002, following a decade of neoliberal “creative destruction” in his home country, Draghi took up a position in the United States as a managing director at Goldman Sachs, returning to Italy in 2005 as the new governor of the Bank of Italy. The zenith of this exceptional career would be Draghi’s appointment as president of the second-most important central bank in the world, the ECB, in 2011, a position he maintained until 2019. Though Draghi would go down in history as “the man who saved the euro”—a questionable achievement—his eight-year mandate at the ECB would also mark the euro­zone’s transformation from a dysfunctional but formally democratic monetary union into an unprecedented supranational governance structure. Through a complex array of mechanisms, governments would be disciplined and punished, and the formal democratic pro­cess itself would be systematically subverted through financial and monetary blackmail, first and foremost at the hands of the ECB.

Indeed, this was visible already in August 2011, a few months before Draghi took office at the ECB. Amid rising interest rates on Italian bonds, Draghi and his predecessor Jean-Claude Trichet sent an extraordinary (and, at the time, secret) letter to the Italian government that showed exactly how the ECB intended to make use of the crisis to blackmail Italy into mounting “structural reforms.” The letter claimed that Italy’s postcrisis deficit-cutting plan was “not sufficient” and demanded, in exchange for continued central bank support for Italian government bonds, “a major overhaul of the public administration”—including “the full liberalization of local public services,” “large scale privatizations,” “reducing the cost of public employees,” “reform [of] the collective wage bargaining system,” “more stringent . . . criteria for seniority pensions,” and even “constitutional reform tightening fiscal rules.” Such demands went far beyond the ECB’s monetary prerogatives.

The Italian government responded by pledging far-reaching re­forms and deeper budget cuts. Within a month, however, Italian ten-year bond yields had started rising once again, forcing Prime Minis­ter Silvio Berlusconi to resign following the loss of his parliamentary ma­jority. At that point, Italian president Giorgio Napolitano appointed Mario Monti, a former European commissioner and international adviser to Goldman Sachs, to form—you guessed it—a “technical government.” It was back to the 1990s.

Most accounts portrayed this political crisis as the financial mar­kets’ “natural” response to Berlusconi’s poor handling of the eco­nomic crisis, in line with the dominant narrative of the European “debt crisis.” The reality, however, is far more troubling. As even the Financial Times acknowledged, it is by now increasingly clear that the ECB under Draghi “forced Silvio Berlusconi to leave office in favor of unelected Mario Monti,” by discontinuing the central bank’s Italian bond purchases—thus deliberately causing interest rates to rise above safety levels—and by making Berlusconi’s ouster the precondition for further ECB support of Italian bonds. This was belatedly admitted even by Monti himself, who claimed in a 2017 interview that, in late 2011, Draghi “decided to stop the purchases of Italian government bonds, which had kept the Berlusconi government afloat in the summer and autumn of 2011.”

It is hard to imagine a more disturbing scenario than a supposedly “independent” and “apolitical” central bank resorting to monetary blackmail in order to oust an elected government from office and impose its own political agenda. Yet all evidence suggests that this—a monetary coup d’état—is exactly what happened in Italy in 2011. The process would then repeat itself, more or less along the same lines, in Greece in 2015. As Jacob Kirkegaard of the Peterson Institute for International Economics noted that same year, under Draghi’s leader­ship the ECB was rapidly evolving into a “full-blooded political actor engaging in a strategy aimed at forcing EU political leaders to embrace fiscal rectitude.” Indeed, Monti proceeded to administer a devastating austerity “cure” recommended by Brussels, which caused massive economic damage and social upheaval, deepening and accel­erating the thirty-year-long “structural” crisis of Italian capitalism engendered by the post-Maastricht regime. Analogous austerity poli­cies were continued by the three successive governments—all led by the PD under the banner of neoliberal-progressive Europeanism. This laid the ground for the 2018 “anti-establishment” backlash.

A Short-Lived Backlash

In the March 2018 election, the political establishment that had ruled Italy for the previous quarter century, embodied by the Democratic Party (PD) and Forza Italia, suffered an unprecedented collapse. Meanwhile, the two major “anti-establishment” parties—the Five Star Movement and the League—experienced a spectacular surge, winning, respectively, 32.7 and 17.4 percent of the vote. The downfall of the political establishment—and the rise of so-called populist parties—can only be understood against the backdrop of the longest and deepest period of stagnation—and increasingly, recession—in Italy’s history.

As mentioned previously, until the late 1980s Italy enjoyed three decades of relatively robust growth; then, beginning in the early to mid-1990s, all its main economic indicators—productivity, industrial production, per capita growth, etc.—began to steadily decline and have stagnated ever since. This is, to a large degree, the result of Italy’s adoption of a legal and economic superstructure—estab­lished by the Maastricht Treaty of 1992 and the European Monetary Union (EMU) in 1999—that was (and is) fundamentally incompatible with the country’s political economy. This has now found empirical confirmation in several studies. The post-Monti policies of “structural adjustment” simply exacerbated an already problematic situation.

Given the EU’s role in all of this, and particularly its involvement in the Monti affair, it’s hardly surprising that the 2018 elections saw voters punish pro-EU parties the hardest, while rewarding the two parties most critical of the EU: the M5S and League. I have previously described this phenomenon as “the revenge of depoliticization,” where local elites, by adopting the Maastricht straightjacket, ultimately ended up destroying the material base of their own consensus. In this sense, 2018 marked the exhaustion of neoliberal-progressive Europeanism; that is, the view of European integration as a progressive path towards democracy and prosperity.

Nonetheless, despite the relative majority obtained by the two euroskeptic parties, the vincolo esterno would prove hard to kill. Following talks between the two parties, as required by the Italian constitution, they submitted their choice of government ministers to the president, Sergio Mattarella, for approval. Yet their proposed economic minister, Paolo Savona, was vetoed by Mattarella due to his euro-critical stance, forcing the two parties to ultimately opt for the more status quo–friendly Giovanni Tria. In doing so, Mattarella effec­tively prioritized Italy’s continued adherence to the eurozone, despite the enormous social and economic costs this entails, over the funda­mental values and principles enshrined in Italy’s national constitution.

It is a telling demonstration of the extent to which EMU membership has deeply transformed not only Italy’s form of government but even its constitutional architecture. The external constraint is perhaps no longer even external; it has essentially been embedded into the country’s state institutions. It now appears that the primary role of the Italian president (who is elected by parliament, not by citizens) has become that of safeguarding the integrity of the EU, whatever the cost. As argued by law experts Marco Dani and Agustín José Menen­dez, Mattarella’s decision would seem to point to the existence of “a form of ‘convention’ (functionally equivalent to a constitutional convention) according to which political parties or coalitions that are critical of the existing economic and monetary arrangements within the eurozone cannot get into government. Or, more accurately, they are entitled to govern [only] in a tamed form.”

Indeed, by appointing a man loyal to the EU to the most important government post of all, the Ministry of Economy and Fi­nance—in charge of carrying out all the major economic negotiations with the EU through the ecofin (Economic and Financial Affairs Council) and the Eurogroup, over which the national parliament has little or no oversight—the president effectively put the M5S-League government into “controlled administration” before it was even born. One could say that the government’s fate was sealed from that mo­ment on. In fact, the new government soon found itself on a collision course with Brussels over a minuscule budget deficit increase, re­quired to finance the government’s two flagship proposals: a citizen’s income and a reform lowering the pension age. Meanwhile, tensions arose in financial markets, causing an increase in bond yields, which the ECB did nothing to stem. It was another telling reminder of Wynne Godley’s warning that “[i]f a country gives up or loses [the power to issue its own money], it acquires the status of a local authority or colony.”

Draghi Returns to the Scene of the Crime

The constant external pressures on the government’s action eventually led League leader Matteo Salvini to pull the plug on the government, in the summer of 2019, leading to a new—unthinkable only few days before—technopopulist alliance between the M5S and the PD, now once again back at the helm of government, courtesy of the vincolo esterno. In a classic case of “be careful what you wish for,” however, within the space of a few months the new government would find itself overwhelmed by the Covid-19 pandemic—a crisis dramatically worsened by the vincolo esterno. Not only did the health care cuts administered by Monti as well as other administrations, and demanded by the European Commission, leave the new administration dramatically ill-prepared to fight the Covid-19 outbreak. The architecture of the euro also continues to impede an efficient response, despite extensive central bank support and the temporary suspension of the EU’s budget rules. This led to mounting economic and social costs, and ended up placing a growing strain on the govern­ment—an impasse that we are now told can only be solved by yet another deus ex machina technocrat: Mario Draghi.

Of course, Draghi is literally the bodily incarnation of the politi­cal‑economic model that has gotten Italy into this mess in the first place. It is folly to think that he could somehow represent a solution to a disaster that he contributed so much to bringing about. If anything, the events of the past decade represent a perfect example of the perverse cycle of the vincolo esterno.

On the one hand, the apparently inexorable logic of the external constraint—be it the main­tenance of a fixed exchange rate or the need to appease “markets” or “Europe” in order to avoid retaliation—creates a semipermanent “state of exception.” This means that at any moment the complex dynamics of parliamentary politics may need to give way to “tech­nical”—allegedly nonpolitical—governments tasked with “getting the job done.” On the other hand, the economic and social effects of the external constraint create growing tensions be­tween the demands of citizens and the requirements of the external constraint (and the supranational institutions overseeing it), which national parties are unable to resolve because they lack all the “nor­mal” instruments of eco­nomic policy necessary to maintain societal con­sensus.

The next step is to turn to technocrats to resolve the impasse, by having them implement the measures that political actors don’t want to take responsibility for. Yet whenever a “technical government” is called in to impose such measures, the end result is always a worsening of the country’s social and economic fabric. This makes political parties increasingly unable to solve the fundamental contradictions of the system within the framework of the external constraint (i.e., the euro), which in turn paves the way for the next technical government, in a perverse feedback loop.

Breaking this cycle, by revitalizing the mechanisms of democratic representation and participation demolished by the vincolo esterno, is Italy’s only hope of escaping this déjà-vu-like nightmare. Especially now that Mario Draghi has been called in to finish the job he began thirty years ago.

This article originally appeared in American Affairs Volume V, Number 2 (Summer 2021): 116–38.

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