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Draghi's political downfall: How power imploded in Italy and what happens next – CNBC

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The government of Mario Draghi came to an end earlier than what many analysts expected.
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Mario Draghi is best known for saving the euro. But a coveted rescue of the Italian economy ended prematurely when internal politics came to the fore last month, making it harder and harder for him to govern.

In the space of about a week, Italy went from having a stable government to preparing for snap elections in September — which could see the far-right in charge of the next coalition in Rome. This prospect has investors questioning Italy’s economic future and its broader role within European politics.

Draghi “was certainly a little bit tired of the politics within the government,” an official working for the Italian government, who preferred to remain anonymous due to the political instability in the country and the sensitive nature of the comments, told CNBC.

Once a managing director at Goldman Sachs International, Draghi became Italian prime minister in February 2021 to lead a technocratic government, backed by four main parties across the political spectrum. His arrival in Rome was welcomed by investors and European officials, who were desperate to see a safe pair of hands leading the euro zone’s third-largest economy.

The former European Central Bank chief delivered on several fronts, including putting together a reform plan to get more than 190 billion euros ($194.52 billion) from the EU. The disbursements are, however, linked to the completion of these reforms, so investors fear the next coalition might not follow through with Draghi’s plans, and hence may not receive all of the cash from Brussels.

The prime minister also revived Covid-19 vaccination efforts and contributed to an economic rebound. But throughout his mandate, Draghi had to struggle with a slew of political sensitivities.

What happened?

The collapse of his government came about because of those fragilities at the heart of government. It started with the Five Star Movement (M5S), a left-leaning and populist party, boycotting a vote on a package aimed at helping Italians deal with the surging cost of living. The package included a controversial waste incinerator for Rome, which M5S vehemently rallied against.

The same anonymous CNBC source said M5S has a “great following in Rome, not so much in the rest of the country, but this law was a problem for this electorate.” By not voting for the wide-ranging package and blocking it, the party was in essence against the government that they were part of, the official said.

Draghi offered his resignation after the stalemate on the vote.

A second Italian official, who preferred to remain anonymous due to the sensitive nature of the situation, said the move from M5S was “a significant decision.”

Draghi had “trusted this was a national unity government,” the official said. But with M5S abstaining from the vote on the government’s bill, “Draghi felt [it] was becoming harder and harder to enact his program,” the official added.

By late evening Wednesday July 15, Italy’s President Sergio Mattarella had rejected Draghi’s initial resignation and told him to build a new parliamentary consensus.

In the following days, hundreds of mayors had signed a letter asking him to stay. Union leaders and industrialists also come together to ask Draghi to remain in office. And there was an online petition signed by thousands of citizens who wanted him to stay.

If they said yes, [Draghi] had all the power he wanted.
CNBC Source

The next week, Draghi returned to the Italian Parliament and asked lawmakers for a new mandate. “Are the parties and you parliamentarians ready to rebuild this pact?” he declared in the Senate on July 20. “Italy needs a government that can move swiftly and efficiently,” he told lawmakers.

The first CNBC source said they were surprised that Draghi asked for a new mandate to try to build unity once again. “To be honest, his speech was really tough against M5S and the Lega [party] … his aim was to put it clear: if we do another government, we have to continue without problems,” the source said.

“If they said yes, [Draghi] had all the power he wanted; if they said no, he could resign without being blamed for leaving the country,” the official said.

The second CNBC source stressed that Draghi was “very concerned” about being able to pass new laws in Parliament. Draghi was due to finish his mandate before next summer with parliamentary elections expected in June 2023.

What’s next?

But Italy is now preparing for a new vote on September 25 with a lot at stake.

“If a right-wing coalition were to win in Italy’s general election on 25 September, and subsequently abandon economic reforms, it could jeopardise not only Italy’s access to EU fiscal support and the ECB’s new anti-fragmentation tool, but more generally future EU integration and joint debt issuance,” George Buckley, an economist at Nomura, said in a research note last week.

The upcoming election will matter not only to see where Italy’s finances and fiscal strategy will be heading, but also whether Europe will continue to raise new funds together.

The recovery plan came about because of the impact that the coronavirus lockdowns had on the European economies. This was so significant that the 27 members of the EU decided to raise money jointly through the European Commission, the executive arm of the EU, for the first time. Italy, because it suffered the most from the pandemic, is receiving the largest chunk of the money borrowed.

However, if there are problems with the political situation of the biggest benefactor, then this could stifle more joint borrowing further down the line, including when tackling climate change or the impact from Russia’s invasion of Ukraine.

“Italy’s next government is unlikely to bring the country’s future in the euro-zone into doubt, in a repeat of the turmoil that we saw after the 2018 election. But it will probably run looser fiscal policy and find it more difficult to pass reforms,” Jack Allen-Reynolds, senior Europe economist at Capital Economics, said in a note last week.

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‘Disgraceful:’ N.S. Tory leader slams school’s request that military remove uniform

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HALIFAX – Nova Scotia Premier Tim Houston says it’s “disgraceful and demeaning” that a Halifax-area school would request that service members not wear military uniforms to its Remembrance Day ceremony.

Houston’s comments were part of a chorus of criticism levelled at the school — Sackville Heights Elementary — whose administration decided to back away from the plan after the outcry.

A November newsletter from the school in Middle Sackville, N.S., invited Armed Forces members to attend its ceremony but asked that all attendees arrive in civilian attire to “maintain a welcoming environment for all.”

Houston, who is currently running for re-election, accused the school’s leaders of “disgracing themselves while demeaning the people who protect our country” in a post on the social media platform X Thursday night.

“If the people behind this decision had a shred of the courage that our veterans have, this cowardly and insulting idea would have been rejected immediately,” Houston’s post read. There were also several calls for resignations within the school’s administration attached to Houston’s post.

In an email to families Thursday night, the school’s principal, Rachael Webster, apologized and welcomed military family members to attend “in the attire that makes them most comfortable.”

“I recognize this request has caused harm and I am deeply sorry,” Webster’s email read, adding later that the school has the “utmost respect for what the uniform represents.”

Webster said the initial request was out of concern for some students who come from countries experiencing conflict and who she said expressed discomfort with images of war, including military uniforms.

Her email said any students who have concerns about seeing Armed Forces members in uniform can be accommodated in a way that makes them feel safe, but she provided no further details in the message.

Webster did not immediately respond to a request for comment.

At a news conference Friday, Houston said he’s glad the initial request was reversed but said he is still concerned.

“I can’t actually fathom how a decision like that was made,” Houston told reporters Friday, adding that he grew up moving between military bases around the country while his father was in the Armed Forces.

“My story of growing up in a military family is not unique in our province. The tradition of service is something so many of us share,” he said.

“Saying ‘lest we forget’ is a solemn promise to the fallen. It’s our commitment to those that continue to serve and our commitment that we will pass on our respects to the next generation.”

Liberal Leader Zach Churchill also said he’s happy with the school’s decision to allow uniformed Armed Forces members to attend the ceremony, but he said he didn’t think it was fair to question the intentions of those behind the original decision.

“We need to have them (uniforms) on display at Remembrance Day,” he said. “Not only are we celebrating (veterans) … we’re also commemorating our dead who gave the greatest sacrifice for our country and for the freedoms we have.”

NDP Leader Claudia Chender said that while Remembrance Day is an important occasion to honour veterans and current service members’ sacrifices, she said she hopes Houston wasn’t taking advantage of the decision to “play politics with this solemn occasion for his own political gain.”

“I hope Tim Houston reached out to the principal of the school before making a public statement,” she said in a statement.

This report by The Canadian Press was first published Nov. 8, 2024.

The Canadian Press. All rights reserved.

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Saskatchewan NDP’s Beck holds first caucus meeting after election, outlines plans

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REGINA – Saskatchewan Opposition NDP Leader Carla Beck says she wants to prove to residents her party is the government in waiting as she heads into the incoming legislative session.

Beck held her first caucus meeting with 27 members, nearly double than what she had before the Oct. 28 election but short of the 31 required to form a majority in the 61-seat legislature.

She says her priorities will be health care and cost-of-living issues.

Beck says people need affordability help right now and will press Premier Scott Moe’s Saskatchewan Party government to cut the gas tax and the provincial sales tax on children’s clothing and some grocery items.

Beck’s NDP is Saskatchewan’s largest Opposition in nearly two decades after sweeping Regina and winning all but one seat in Saskatoon.

The Saskatchewan Party won 34 seats, retaining its hold on all of the rural ridings and smaller cities.

This report by The Canadian Press was first published Nov. 8, 2024.

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Nova Scotia election: Liberals say province’s immigration levels are too high

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HALIFAX – Nova Scotia‘s growing population was the subject of debate on Day 12 of the provincial election campaign, with Liberal Leader Zach Churchill arguing immigration levels must be reduced until the province can provide enough housing and health-care services.

Churchill said Thursday a plan by the incumbent Progressive Conservatives to double the province’s population to two million people by the year 2060 is unrealistic and unsustainable.

“That’s a big leap and it’s making life harder for people who live here, (including ) young people looking for a place to live and seniors looking to downsize,” he told a news conference at his campaign headquarters in Halifax.

Anticipating that his call for less immigration might provoke protests from the immigrant community, Churchill was careful to note that he is among the third generation of a family that moved to Nova Scotia from Lebanon.

“I know the value of immigration, the importance of it to our province. We have been built on the backs of an immigrant population. But we just need to do it in a responsible way.”

The Liberal leader said Tim Houston’s Tories, who are seeking a second term in office, have made a mistake by exceeding immigration targets set by the province’s Department of Labour and Immigration. Churchill said a Liberal government would abide by the department’s targets.

In the most recent fiscal year, the government welcomed almost 12,000 immigrants through its nominee program, exceeding the department’s limit by more than 4,000, he said. The numbers aren’t huge, but the increase won’t help ease the province’s shortages in housing and doctors, and the increased strain on its infrastructure, including roads, schools and cellphone networks, Churchill said.

“(The Immigration Department) has done the hard work on this,” he said. “They know where the labour gaps are, and they know what growth is sustainable.”

In response, Houston said his commitment to double the population was a “stretch goal.” And he said the province had long struggled with a declining population before that trend was recently reversed.

“The only immigration that can come into this province at this time is if they are a skilled trade worker or a health-care worker,” Houston said. “The population has grown by two per cent a year, actually quite similar growth to what we experienced under the Liberal government before us.”

Still, Houston said he’s heard Nova Scotians’ concerns about population growth, and he then pivoted to criticize Prime Minister Justin Trudeau for trying to send 6,000 asylum seekers to Nova Scotia, an assertion the federal government has denied.

Churchill said Houston’s claim about asylum seekers was shameful.

“It’s smoke and mirrors,” the Liberal leader said. “He is overshooting his own department’s numbers for sustainable population growth and yet he is trying to blame this on asylum seekers … who aren’t even here.”

In September, federal Immigration Minister Marc Miller said there is no plan to send any asylum seekers to the province without compensation or the consent of the premier. He said the 6,000 number was an “aspirational” figure based on models that reflect each province’s population.

In Halifax, NDP Leader Claudia Chender said it’s clear Nova Scotia needs more doctors, nurses and skilled trades people.

“Immigration has been and always will be a part of the Nova Scotia story, but we need to build as we grow,” Chender said. “This is why we have been pushing the Houston government to build more affordable housing.”

Chender was in a Halifax cafe on Thursday when she promised her party would remove the province’s portion of the harmonized sales tax from all grocery, cellphone and internet bills if elected to govern on Nov. 26. The tax would also be removed from the sale and installation of heat pumps.

“Our focus is on helping people to afford their lives,” Chender told reporters. “We know there are certain things that you can’t live without: food, internet and a phone …. So we know this will have the single biggest impact.”

The party estimates the measure would save the average Nova Scotia family about $1,300 a year.

“That’s a lot more than a one or two per cent HST cut,” Chender said, referring to the Progressive Conservative pledge to reduce the tax by one percentage point and the Liberal promise to trim it by two percentage points.

Elsewhere on the campaign trail, Houston announced that a Progressive Conservative government would make parking free at all Nova Scotia hospitals and health-care centres. The promise was also made by the Liberals in their election platform released Monday.

“Free parking may not seem like a big deal to some, but … the parking, especially for people working at the facilities, can add up to hundreds of dollars,” the premier told a news conference at his campaign headquarters in Halifax.

This report by The Canadian Press was first published Nov. 7, 2024.

— With files from Keith Doucette in Halifax

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