By Engaging Italy, Biden Can Strengthen Both the United States and the EU

Italian Prime Minister Mario Draghi holds a press conference, March 2021.

A huge development occurred in Rome last month—one that barely registered in Washington.

In a stunning turn of events, Mario Draghi, the former head of the European Central Bank—and the man many rightly credited with saving the Euro and potentially the European Union (EU) itself following the 2008 financial crisis—became Italy’s 67th prime minister. At first glance, this might seem to be just another unexpected twist in Italy’s notoriously volatile politics. However, Draghi’s appointment is a huge opportunity for President Joe Biden to advance his agenda to rebuild the American economy.

Europe is about to lose German Chancellor Angela Merkel as its de facto leader. Merkel is stepping down in September after 16 years in power. Merkel’s departure creates an opportunity for Draghi to shift away from the German driven focus on austerity in Europe as well as to stiffen its resolve on Russia and China.

Draghi is now the most respected economic leader in Europe, a bloc whose economy is equivalent in size that that of the United States or China. Draghi is famous for his role as president of the European Central Bank, where his commitment to “do whatever it takes” saved the euro from imminent collapse. His big breakthrough, insiders pointed out, was winning German support for an open-ended commitment. He even received the German Order of Merit for his efforts. This is exactly the attitude and approach Europe needs now in order to confront the challenge of rebuilding an economy devastated by the pandemic and putting it on a path to green growth.

For Italy to recover, Draghi needs the EU to adopt a new course. After the 2008 financial crisis, Europe, driven by German phobias of inflation, pursued a self-defeating policy of austerity, driving weaker economies, like those of Italy, Greece, Ireland, and Spain, to the brink of collapse and stifling the global recovery. Only Draghi’s intervention saved the common currency, but even his monetary policies could not reverse a gross error of fiscal policy. Europe began to move in a new direction last summer, when Germany reversed itself and agreed to an EU recovery package of 750 billion euros. However, there are already concerns that this sum is still too small, particularly in comparison to the U.S. stimulus package. This recovery package is key to tackling other key issues as well, including significant green investments that could help the EU meet its ambitious climate targets. The need for a robust package is particularly acute, as the pandemic hit the EU’s economy harder than the United States. There are calls for the EU recovery fund to be made permanent or expanded. Conversely, there is already pushback from frugal European states such as the Netherlands and Finland and neoliberal ideologues for the EU to return to the strict budget rules that brought economic ruin.

This is not a strictly European debate. The EU is the United States’ largest exporter and second-largest importer. Between them, the United States and EU account for half the world’s economic output, and a strong European economy means a bigger market for U.S. goods. President Barack Obama in his memoirs all but blames the EU for losing him the 2010 midterms and stalling his presidency, as the Greek financial crisis metastasized while Germany blocked a stronger EU response. Just as President Biden has pushed bold action and reform at home, he needs to encourage Europe to do the same. Treasury Secretary Janet Yellen, who worked closely with Draghi when she was chair of the Federal Reserve, should engage Draghi with the goal of forging a transatlantic economic recovery plan.

Draghi’s appointment also creates an opening for the United States to push for a stronger European approach to China and Russia. Under the previous government of Giuseppe Conte, Italy signed onto China’s Belt and Road Initiative, hoping to find an alternative to a stagnant EU in order to revive the Italian economy. Meanwhile, Italy’s populist Lega party was awash in scandal relating to its sordid ties to the Kremlin. Italy has long been seen as a weak spot in the EU in dealing with tough geopolitical competitors. But in his inaugural speech to the senate, Draghi reconfirmed Italy’s Atlanticist orientation, rejected the outreach to China, and reiterated Italy’s support for the EU and NATO. Rome’s adoption of a stronger stance than Berlin’s toward Beijing and Moscow would mark an immense shift in the complex geometry of European foreign policy.

Forging a unified European approach, whether on China or economic policy, is notoriously difficult and will inevitably require gaining the backing of Germany, which is loath to upset the status quo. But, too often, U.S. foreign policy toward Europe has been passive and one-dimensional. Understandably, seeing Germany as Europe’s main power, Washington has focused on engaging Berlin, but when Germany refused to budge, the United States too often throws up its hands in frustration, as Obama did during the Greek financial crisis. Draghi’s arrival is an opportunity for the United States to pursue a more sophisticated diplomatic strategy—engaging Rome and Paris as well as Berlin—while working with the EU institutions in Brussels and the other members to craft a common economic and security agenda. U.S. engagement could therefore act as a critical catalyst for the EU.

Draghi could prove central in pushing such a realignment. For the first time in many years, the Italian prime minister has the political strength at home and the track record in Europe to stand as a full peer of his German and French colleagues. But the Biden administration has to wake up to Italy’s renewed importance and act fast. Draghi’s technocratic government is expected to remain for only the next two years. Elections are scheduled for 2023, and Draghi has made it clear he will not take part. The next year—as the world economy restarts—will be crucial in setting the course of Europe’s direction for the next decade.

Max Bergmann is a senior fellow at the Center for American Progress. He served as a senior adviser and member of the Policy Planning Staff in the State Department from 2011 to 2017. Simon Clark is a senior fellow at the Center for American Progress and the author of “Terror Vanquished: The Italian Approach to Defeating Terrorism.”