Your editorial (“Draghi embarks on an Italian rescue mission”, FT View, February 4) understates Mario Draghi’s Herculean challenge by failing to mention that he will be confronted with a considerably worse economic situation than that which faced Mario Monti, Italy’s last technocratic prime minister.
It is not simply that Italy’s sclerotic economy now finds itself in the grip of its worst economic recession since the 1930s. Italy now has its largest postwar budget deficit and its highest public debt-to-gross domestic product ratio in the country’s 150-year history.
Draghi’s main economic challenge will be to restore the country’s public debt sustainability while at the same time reviving economic growth. Yet like Monti before him, he will need to do so within a euro straitjacket that precludes Italy from using currency depreciation or an independent monetary policy as an offset to budget belt-tightening.
If Draghi is to succeed where Monti failed, he will need to pull a very large economic rabbit out of his hat.
American Enterprise Institute
Washington, DC, US