Draghi under high pressure as spotlight falls on Rome


Good morning and welcome on board Europe Express! My name is Valentina Pop and I will be your guide through the maze of European news, making sense of what matters for you to stay ahead.

Today we will stop in Rome, where Prime Minister Mario Draghi goes to parliament to present Italy’s €220bn spending plan. The stakes could not be higher, as the plan has the potential to make or break the EU’s coronavirus pandemic recovery as a whole. No pressure! In any case, the former European Central Bank supremo is used to taking market-moving decisions. Markets have kept cool so far about Italy’s ballooning deficit and debt.

We will also look at French president Emmanuel Macron, who has hit the campaign trail early with topics dear to the right’s heart — migration and security. The killing of policewoman in a suspected Islamist attack on Friday added fuel to that debate.

France and Italy will ease lockdown restrictions on Monday and the European Union’s agriculture ministers will tune in for an online council. We will get to these and more agenda items for the week ahead in a minute.

But before we do, a word on Ukraine, where President Volodymyr Zelensky has called for the US, UK and Canada to take a bigger diplomatic role in ending the conflict in the Donbas region. In an interview with FT Europe editor Ben Hall, the president, who recently endured a Russian presence deployed and then withdrawn from his country’s border, deplored the lack of flexibility of the current peace process. “I’m now participating in the process that was designed before my time,” said Zelensky, who was elected in 2019 on a promise to end the war. (Read the full story here).

In Draghi we trust

Mario Draghi is a man accustomed to high expectations, writes Miles Johnson, FT Rome correspondent. When Draghi was ECB president, traders hung not only on his every word — they even tried to extract meaning from the colour of the tie he decided to wear at press conferences.

Yet the pressure Draghi is under to deliver meaningful reforms in what will probably be a short time in office is arguably greater than any he faced at the ECB.

Draghi will appear in front of Italian lawmakers on Monday to present a €220bn recovery plan that many hope will be not only the catalyst for ending decades of economic stagnation but will also mark a watershed in EU solidarity.

The spending plan, which is expected to be made up of €191.5bn of loans and grants from the Next Generation EU pandemic recovery fund, will combine big-ticket infrastructure spending with an attempt to address some of the structural problems of an economy that hasn’t grown in real terms in twenty years (Find out more about the plan here).

Expectations in Italy are already sky-high, with many hailing Draghi’s plan as the first serious attempt in generations to slash the twin Gordian knots of the country’s inefficient public administration and horrifically slow legal system.

In the short term, Draghi has options his predecessors lacked. Not long ago, any attempt by Rome to slightly increase the country’s budget deficit sparked panic in bond markets and consternation in Brussels. Given Draghi’s unmatched credibility with investors, however, this time could be different. It also helps that Draghi has restored Italy’s reputation among European leaders.

His plan will balloon the country’s deficit for 2021 to 11.8 per cent of gross domestic product, its highest level since the early 1990s. Debt to GDP will rise to almost 160 per cent, the highest point since the birth of the Italian republic following the second world war.

Spurred by looser purse strings and EU money, the Italian government has forecast the country’s economy to grow 4.5 per cent this year and 4.8 per cent in 2022. This projected growth is in turn expected to have a mitigating effect on the country’s debt-to-GDP, which could drop to 152.7 per cent by 2024.

All of this is encouraging, and could potentially help turn round an economy that has fallen steadily behind Germany and France. A growing Italy would remove one of the principal uncertainties facing the eurozone over the next few decades.

But the success of Draghi’s reforms will not be decided by him. He is almost certain to step down as prime minister by 2023. Italy’s becalmed national politics will revert to acrimony, and there is the risk that potentially unpopular reforms will be binned.

Chart du jour: European (wind) power

Column chart of Generating capacity (GW) showing Offshore wind power has been led by Europe

The Biden administration plans to install 30 gigawatts of offshore wind power by 2030, creating 77,000 jobs. But catching up with Europe will be quite the challenge (find out why). To follow climate and energy policies in depth, subscribe to our Energy Source newsletter.

Hitting the campaign trail, Macron-style

Emmanuel Macron has not declared that he will stand for re-election as France’s president, but his enthusiastic focus on law and order and national security in the midst of the coronavirus pandemic has made it clear that he is already on the campaign trail for the contest a year from now, writes Victor Mallet, FT Paris bureau chief.

French President Emmanuel Macron
French president Emmanuel Macron is expected to run for a second term next year © AP

With the left enfeebled and marginalised in national politics, a large majority of French voters support centre-right or far-right parties and politicians. Crime and Islamist terrorism, and immigration, will probably be high on the political agenda in 2022 alongside management of the Covid-19 crisis. 

Macron, elected four years ago as a young liberal politician who claimed to be “neither right nor left”, began addressing favourite rightwing themes, such as the country’s “too lax” immigration policies, back in 2019 (More about that here).

But with the latest opinion polls confirming that his main rival for the Elysée Palace will be Marine Le Pen of the extreme right Rassemblement National, Macron has doubled down on security issues, expressing support for the police and promising to crack down on drug dealers and criminals.

The ever-present threat of Islamist terror is also an issue, underlined by the knife murder of a policewoman by a Tunisian man in a suspected Islamist attack near Paris on Friday. “We will yield nothing in the struggle against Islamist terrorism,” said Macron.

Last week, the French president spent 40 minutes in an unmarked police car in the southern city of Montpellier being shown the spots where drug dealers ply their trade and hearing residents’ complaints about gangs, violent crime and the lack of racial mixing in the poorer districts of the city. 

“I’m fighting for the right to live in peace,” Macron told the conservative newspaper Le Figaro in an interview dedicated to law and order. 

He also vowed to fulfil a plan to hire 10,000 extra police and gendarmes by the end of his mandate next year and to tackle the “exploding” drugs trade.

“This trade is the economic underpinning of violence in our country,” he said. “Eradicating it has become the mother of battles, since drugs feed some [Islamist] separatist networks but also day-to-day crime, even in small towns that have been spared until now.” 

Macron’s drive on law and order and Islamism, spearheaded by hardline interior minister Gérald Darmanin, is aimed at drawing votes away from Le Pen and the far-right as well as from potential rivals on the centre-right whose political complexion is more akin to his own. The most prominent of these at the moment is Xavier Bertrand, leader of the Hauts-de-France region in the north, who has already declared his candidacy and promised to restore law and order and crush Islamists.

The French presidential election is a year away — and the country is immersed in a third wave of the pandemic — but campaigning is already well under way. 

Three things to watch today

  1. France, Italy ease lockdown restrictions

  2. European parliament plenary resumes

  3. EU agriculture ministers meet online

. . . and later this week

  1. The EP votes on the EU-UK trade deal on Tuesday

  2. UN talks on Cyprus reunification take place in Geneva from Tuesday to Thursday

  3. EU governments must submit national recovery plans by Friday

Notable, Quotable

  • Once chaotic and derided for their diets, the German Greens have become a well-oiled political machine with a shot at the chancellery (find out why).

  • Ursula von der Leyen, European Commission president, said American tourists who have been fully vaccinated against Covid-19 will be able to visit the EU, raising hopes for the summer tourism season. (NYT)

  • The US and EU still emit far more CO2, but China is catching up (Der Spiegel).

  • Turkey hit back at the US after President Joe Biden on Saturday recognised the first world war-era Armenian genocide.

Are you enjoying Europe Express? Sign up here to have it delivered straight to your inbox every workday at 7am CET. To meet the team behind Europe Express, register for our live event on April 29. Do tell us what you think, we would love to hear from you: europe.express@ft.com.

Today’s Europe Express team: miles.johnson@ft.com, victor.mallet@ft.com, ben.hall@ft.com, valentina.pop@ft.com. Follow us on Twitter: @MilesMJohnson, @VJMallet, @hallbenjamin, @valentinapop.


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