ECB conference: Mario Draghi discusses policy stance
Italy’s 10-year bond yield hovered close to one-month lows on Monday, as Mario Draghi’s prospects of forming a new government received a boost after the two largest parties in the Italian parliament offered their conditional backing. But former Greek Finance minister Yanis Varoufakis urged Italians to be cautious about Mr Draghi’s intentions.
Speaking to Italian Radio Popolare, Mr Varoufakis warned the former ECB director will undoubtedly act in Brussels and Berlin’s best interests before taking Italians’ priorities at heart.
The left-wing eurosceptic who was finance minister of Greece during the 2012 eurozone crisis, said he remembers Mr Draghi’s handling of Greece’s bankruptcy very well as he warned Italian politicians against voting for him in Parliament later this week.
He said: “Humanly, Draghi is like everyone else in Brussels and Frankfurt, at least as I remember him at the Eurogroup.
“Politically he is at the service of the financial order. Technically he is very capable and has shown great ability to understand what is good and what is not in the logic of service to the financial order and the establishment.
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“In this sense, he is the ideal prime minister for Italy if what you really want is to implement the policies of Brussels and Berlin and to pretend that the Recovery Fund is truly the salvation of Italy. While it is nothing more than a debt package.”
Asked whether Mr Draghi could be seen as an envoy of the Troika, Mr Varoufakis said: “It would not be the first time, it has already happened with Mario Monti, another intelligent man whose technical government acted as the Troika wanted, otherwise the proper Troika would have arrived.
“This is how things work in the eurozone, especially in countries close to bankruptcy, those that are not sustainable within this monetary union, where political decisions are dictated from abroad, from the centres of financial power and with the enthusiastic support of local oligarchies, whether Greek or Italian, against the great majority of people, of the people.”
He continued: “Undoubtedly Draghi is intelligent and very competent, very good at achieving his goals.
“The great tragedy of the Italian people is that his objectives are enemies of the interests of the great majority of Italians.
“Draghi will not be autonomous, as former premier Monti was not.
“He will have to report to parties that are now zombies but above all in Brussels and Berlin.
“He may even have a fairly Keynesian and social democratic semblance, in public he may even blame Brussels, Frankfurt and Berlin for not supporting him enough, but he will carry out all their imperatives.
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“As a Democrat, I would always vote against a technocrat like Mario Draghi, it is essential that we defend the right of people to choose who governs them.
“And in addition to this, I must say that I personally remember well when Draghi was decisive in closing the ATMs in Greece, so as to prevent the Greek people from freely deciding in the referendum in which the position to be held vis-à-vis Brussels was decided.
“I think that every democrat in Italy must oppose his government.”
Most other eurozone bond yields, especially in safe-haven Germany, edged up in the face of a more upbeat tone in world markets and a selloff in long-dated US Treasuries on expectations for more stimulus that will boost growth and inflation.
But it was Italy, which last week saw the biggest weekly fall in 10-year bond yields in months, that remained in focus in the euro area.
The anti-establishment Five-Star Movement and the rightist League on Saturday gave their backing to Mr Draghi, who was asked last week to form a government after the previous ruling coalition collapsed.
While Mr Draghi’s route to power is still not clear, signs of support from some of the biggest parties in the Italian parliament helped support Italian bonds in early Monday trade.
Italy’s 10-year bond yield was a touch lower at 0.53 percent, hovering near almost one-month lows hit on Friday.
At current levels, the yield is just six basis points away from record lows hit late last year.
That left the gap over benchmark 10-year Bund yields at around 95 bps — close to its tightest levels in five years.
Having completed the first round of formal consultations with parties on Saturday, Mr Draghi will hold more talks this week aimed at drawing up a cabinet, a broad policy agenda and establishing the make-up of a ruling coalition.
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