Draghi’s purge of Italian state has its limits

It did not take long before Mimmo Parisi had to eat his words.

The president of Italy’s labour policies agency, who is being investigated by auditors for expensing €160,000 of first-class round trips from Rome to the US where he is legally resident, dismissed reports earlier this month that he was about to lose his government job as “domestic gossip”.

But the next day, Italy’s labour minister announced that the Mississippi State University demographer and statistics professor would lose his Italian state job.

Parisi is just the latest head to roll as Mario Draghi, the prime minister, seeks to revamp state-controlled companies and other institutions before €220bn of EU funds start pouring in and structural reforms are passed. Without such reforms, much of that money risks being wasted, analysts have warned.

“What is at stake . . . is the country’s future,” said Maurizia Iachino, a corporate governance consultant. Draghi’s job changes, which seek to introduce more professional appointments, come after consulting “with the people he trusts, who are mostly linked to his past experiences as a civil servant”, she added.

So far, during his first three months in office, Draghi, a former Treasury director-general and head of the Italian central bank, has replaced the national Covid commissioner, the civil protection agency chief, and the head of Italy’s secret service — putting into that job the first woman to lead the bureau.

“It’s simply a problem solving approach,” one senior official said.

The sweep out of state posts is part of the Draghi government’s general efforts to depoliticise the bureaucracy amid widespread hand-wringing about state inefficiency and poor management.

A swath of other changes are expected soon. Over the next few months, the terms of 74 boards of directors expire at 90 publicly-backed companies, according to the consultancy CoMar. Fifteen of them, with combined revenues of more than €70bn, are directly controlled by the finance ministry.

That any changes are happening at all is testament to Draghi’s credibility as the former head of the European Central Bank. This has given him some “autonomy” from the usual politicking that accompanies such appointments, said Nicola Pasini, a political-science professor at the Università Statale di Milano.

“He can focus on competence and professional qualities as opposed to political affiliation,” he said.

It is the kind of change that Italy chronically needs. Cleaning up state administration is part of what Giuliano Amato, who led Italy’s privatisation efforts as prime minister in the early 1990s, recently called the country’s need to end the political “pollution” of businesses.

“Publicly-backed companies end up in the hands of political parties [and their demands] which shifts their function,” Amato told Italian daily La Repubblica.

First up among state companies where change may come as soon as this month are state-backed investment bank Cassa Depositi e Prestiti, and state-owned railway Ferrovie dello Stato, both of which are set to be major beneficiaries of EU money.

Both companies “are crucial in the context of the EU’s recovery fund,” Iachino said.

The issue is particularly salient at the railway operator, which has been thrown into turmoil by investigations into insurance and IT contracts it took out. The group also took part in the failed rescue of national airline Alitalia, and its board recently approved a series of generous performance bonuses — despite posting a net loss of €562m in 2020 while receiving €1.1bn in Covid-related subsidies.

Still, according to analysts and investors, it will take a lot more than Draghi changing a few senior appointees to shift Italy’s deeply rooted political and corporate dynamics in a meaningful way.

“Draghi . . . was put in office with a very specific mandate [linked to Italy’s post-pandemic recovery],” said Pasini. “For long lasting change to happen what needs to change are the bureaucrats and the implementation processes.”

One limit on change is that while Draghi might install new chief executives, board-level appointments will probably remain subject to political influence.

“Draghi will focus on the top jobs,” said Iachino. “That means directors’ appointments will be left to the usual parties dynamic . . . there’s still a huge token to be paid to politics.”

Draghi’s time in office might also prove to be too short to change the country’s flawed institutional apparatus.

Matteo Salvini, the leader of the rightwing League party, a junior and often confrontational partner in the coalition government, has already voiced scepticism about the ability of the Draghi administration to implement crucial structural reforms.

“Let’s be realistic, it won’t be this coalition that changes the justice or the fiscal system,” he recently told La Repubblica.

That, in turn, has raised the question of how long Draghi might stay on as prime minister.

Salvini has said his party would be willing to back Draghi to succeed Sergio Mattarella as president next February, a position that could be supported by other parties and would lead to general elections.

But it would also mean that Draghi would no longer oversee the implementation of reforms, nor the spending of the EU recovery funds that he secured as prime minister.

“There’s a lot of work to do to change the system, which is why many hope that Draghi won’t succeed Mattarella next February,” said Iachino.

“But at the same time we can’t delude ourselves that he’ll stay on as prime minister for the next 10 years,” she added. “That would mean continuity — and when did we ever see continuity in this country?”