Mario Draghi, former head of ECB, tipped to lead Italy out of financial crisis as prime minister

The euro rose on the news that the ex-European Central Bank president may steer the virus-battered country out of its worst recession since 1945

(FILES) In this file photo taken on January 31, 2020 Italian economist Mario Draghi smiles after being awarded the Federal Cross of Merit during a ceremony at the presidential Bellevue Palace in Berlin. Italy's president Sergio Mattarella on February 2, 2021 summoned former ECB chief Mario Draghi to meet him, after talks between the ruling parties failed to agree a new government. Earlier, House Speaker Roberto Fico said that after four days of negotiations, the parties could not find a new majority.  / AFP / Tobias SCHWARZ
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Mario Draghi, the former president of the European Central Bank, has been approached to become Italy’s next prime minister in a bid to steer the virus-battered country out of its worst recession since the end of the Second World War.

The euro rose on the news that the veteran policymaker, widely praised for his pivotal role during the sovereign debt crisis, would take the helm.

Sergio Mattarella, Italy’s head of state, will meet Mr Draghi on Wednesday at midday, the president’s spokesman told reporters after two rounds of talks failed to seal an agreement among parties on a new premiership for the outgoing Giuseppe Conte, who had hoped to make a comeback.

Instead, the president is poised to formally ask Mr Draghi to try to form a government. Mr Mattarella, whose task it is to pick a premier-designate, had earlier appealed to political parties to give the strongest support possible to what he said would be a high-profile figure, warning that Italy could not afford early elections with the pandemic and the need to agree on the European Union’s recovery fund.

The appointment of a crisis-fighter of Mr Draghi’s calibre will be welcomed by markets and could put an end to the political intrigue that threatened to make Italy ungovernable.

Mr Draghi’s job will be to get a grip on debt, which risks becoming unmanageable, and find a path to recovery for an economy that has barely grown in decades. He will also need to deploy all his diplomacy to navigate a complex political landscape rife with infighting.

A trained economist, Mr Draghi is credited with shoring up the euro at the height of the sovereign debt crisis in 2012 with his “Whatever it Takes” speech. He also started the quantitative-easing programme of sovereign debt purchases, which has subsequently been expanded to become a key tool in supporting the European economy during the pandemic.

The euro gained versus the dollar following the announcement. It traded at 1.2040 at 9.59pm in Milan, reversing earlier losses.

The latest, rapid development also appears to put an end to Mr Conte’s political career – at least for now. The outgoing premier, who has no political party of his own, may decide to set up a new grouping, given his strong poll numbers.

Mr Conte’s ruling coalition was brought down by Matteo Renzi, himself a former premier. The two men dislike each other and this outcome represents a victory for Mr Renzi.

In public, Mr Renzi had kept Italy guessing on whether he would agree to Mr Conte’s return, saying only that he wouldn’t veto anyone as the next premier. But in private, he floated Mr Draghi’s name, according to officials who asked not to be named on confidential deliberations.

Mr Draghi’s return to his homeland will not be welcomed by all lawmakers. Several members of the Five Star Movement, the biggest force in parliament, are wary of supporting a figure like Mr Draghi because of their origins as an anti-establishment group.

But Mr Draghi is expected to be able to count on broad support from across the political spectrum.