“For years“, Mario Draghi said last week, “the European Union believed that its economic dimension, with 450 million consumers, gave it geopolitical power and influence in international trade relations“. But this year, he said, will be remembered as the moment when that illusion was shattered. As the former president of the European Central Bank and former Italian prime minister explained, the EU has been under pressure from the United States to accept harmful tariffs and unnecessarily high military spending “in ways and forms that probably do not reflect Europe's interests“, even when it is reduced to the role of a mere “spectator“ everywhere from Gaza to Ukraine.
Dragi is often praised for his rare directness in assessing the state of Europe, a quality that has earned him a reputation as one of the continent’s most astute thinkers. And, of course, he is right when he argues that the EU’s neoliberal architecture – based on the “deliberate reduction of state power” in favor of rules-based market mechanisms – has left Europe tragically unprepared to navigate a world in which military and economic power are increasingly used to defend national interests.
The problem is that Draghi’s so-called analyses usually amount to little more than stating the obvious – facts that are clear to anyone not blinded by ideology or vested interests. In short, the praise speaks less about Draghi’s genius than it does about the poverty of European public debate. But more importantly, while Draghi correctly understands the superficial symptoms of Europe’s malaise, he consistently fails – deliberately – to diagnose the underlying causes.
“The problem is not the lack of integration, but integration.“
For if he is right when he says that the EU’s neoliberal framework – based on government spending cuts, fiscal austerity, wage cuts and an obsession with exports – has weakened Europe, then this is a political cocktail that he himself has helped to mix. He was the architect and implementer of this model. As early as the early 1990s, when he was director general of the Italian Ministry of Finance, he established himself as a leading advocate of the concept of the vincolo esterno (“external constraint“) – the idea that only by “tying the hands“ of national governments through a political-economic straitjacket could neoliberal reforms be imposed that did not enjoy the support of the population. This external constraint was, of course, the European Union and above all the single currency, the roadmap for which was outlined in the Maastricht Treaty of 1992. In this position, Draghi also played a major role in promoting the large-scale privatization of state-owned enterprises in Italy.
Over the next three decades, moving from the private sector (notably Goldman Sachs) to senior government positions, Draghi established himself as one of the most prominent defenders of neoliberal orthodoxy. This role reached its fullest expression during his term as ECB President from 2011 to 2019, and the action that symbolically marked the beginning of his term could not have been more paradigmatic.
In August 2011, at the height of the so-called “euro crisis“, Draghi and his predecessor Jean-Claude Trichet sent a letter to the Italian government. Intended to remain secret, it was subsequently revealed. The letter argued that Italy's post-crisis deficit reduction plan was “insufficient“ and set out detailed demands, including “full liberalisation of local public services“, “large-scale privatisations“, wage cuts and even “a constitutional reform tightening fiscal rules“. Giulio Tremonti, then Italy’s economy and finance minister, later told a group of European finance ministers that his government had received two threatening letters that year: one from a terrorist group, the other from the ECB. “The one from the ECB was worse,” he joked.
Dragi must have concluded that the conditions set out in the letter had not been met because a few months later he "forced" (to quote the neoliberal Financial Times) Silvio Berlusconi to step down in favour of the unelected Mario Monti. Draghi achieved this by suspending the central bank's purchases of Italian bonds - thus deliberately pushing interest rates above safe levels - and by making Berlusconi's removal a precondition for further ECB support for Italian bonds. This was belatedly acknowledged by Monti himself, who said in a 2017 interview that in late 2011 Draghi “decided to stop the purchases of Italian government bonds that had propped up Berlusconi’s government in the summer and autumn of 2011.”
It is difficult to imagine a more disturbing scenario than one in which a supposedly “independent” and “apolitical” central bank uses monetary blackmail to overthrow an elected government and impose its own political agenda. However, all the evidence suggests that this is precisely what happened – a monetary coup – happened in Italy in 2011. Just a few years later, Draghi used the same tools against Greece, effectively blocking the country’s banking system to force the government to comply with EU-mandated austerity policies that Yanis Varoufakis, Greece’s finance minister at the time, likened to a form of “economic waterboarding.”
Even in his brief role as Italian prime minister between 2021 and 2022, Draghi continued this policy. The few “structural” measures adopted by his government were aimed at promoting privatization, liberalization, deregulation, and fiscal consolidation, while he imposed some of the most draconian anti-Covid measures in the world on his country.
Overall, few have been more adamant in their commitment to promoting undemocratic neoliberalism than Mario Draghi in recent decades. But his responsibility for Europe’s downward spiral extends far beyond his role as the chief executor of neoliberalism. In his speech last week, he effectively admitted that the EU had been subservient to the United States. Yet, once again, Draghi failed to mention his own role in bringing about this sorry state of affairs: he has always been a staunch Atlanticist and, as such, has played a key role in ensuring the EU’s structural subservience to Washington.
The EU’s response to the Russia-Ukraine crisis is a good example of this. In his much-discussed report on European competitiveness, published a year ago this week, Draghi highlighted high energy costs as one of the main reasons for the EU’s loss of competitiveness. The report highlighted that European companies face significantly higher prices compared to their American counterparts, which seriously hampers industrial growth and investment.
Fair enough — but it was hardly an act of God. Rather, it was a direct consequence of the EU’s decision to abandon Russian gas, which had accounted for almost half of the bloc’s supplies before the war, in favor of much more expensive American liquefied natural gas (LNG). This policy was, in fact, strongly supported by Draghi. Shortly after the Russian invasion, he, as prime minister, defended the EU’s decision to impose an embargo on gas from Russia, from which Italy imported about 40 percent of its gas. “Do you want air conditioning or do you want peace?” he asked, his logic clearly dubious. Draghi probably assumed that the sanctions would soon paralyze the Russian economy and force Russia to end the war – a scenario that anyone with even a rudimentary understanding of economic and geopolitical realities would have dismissed from the outset.
A few months later, in a speech to the UN that in retrospect seems almost comically wrong, Draghi doubled down, claiming that the sanctions had imposed “extremely heavy costs on Russia” and had “a devastating effect on the Russian military machine and economy,” making it “harder for Russia to respond to the losses that are accumulating on the battlefield.” As we know, none of this happened – the Russian economy proved resilient, the military machine continued to operate, and the losses accumulated not in Moscow but in Draghi’s misguided predictions. All of this was easily predictable and, in fact, predicted by many of us.
All of this raises an obvious question: how can Draghi continue to be praised for denouncing the consequences of the wrong policies he himself promoted? In a normal world, he would be laughed off stage – or pelted with rotten eggs. The fact that he so easily evades responsibility is the clearest expression of the dual nature of EU politics, where failure is not punished but rewarded, and where incompetent leaders routinely rise to the top.
But if Draghi’s refusal to take responsibility for the EU’s problems is bad enough, his proposed solutions are even worse. For Draghi, the cure for the EU’s dysfunction is to give it even more power. “The European Union will have to move towards new forms of integration,” he declared in his final speech. Translation: even greater political, fiscal, military and technological centralization. In other words, according to Draghi, Europe's problems can only be solved by transferring even more power to Brussels and further displacing national governments and parliaments.
But the last thing Europe needs is to give even more power to people like Draghi. On the contrary, if the continent wants to have any chance of reversing its decline, it must reject the illusory dogma of “more Europe” and finally hold its technocrats who created the crisis order they now pretend to diagnose accountable.
Thomas Fazi - UnHerd
translation: Nick Iliev