FXStreet reports that the markets have reacted well to the news that Mario Draghi has been tasked with forming a new government. But economists at Capital Economics doubt that he would have as transformative an impact on the Italian economy as he had on the ECB.

“Given that there is not a lot more the ECB can do to loosen financial conditions, and that Italy has implemented a lot less fiscal stimulus than advanced economies outside the eurozone, Mr Draghi may want to increase the government’s fiscal support.”

“Draghi would be unlikely to push for the money to be spent on short-term giveaways that would be rejected by the EU. Italy could receive funds equivalent to nearly 12% of 2019 GDP spread over 6 years, of which just under 5% of GDP are grants.”

“His chances of implementing meaningful reform would depend on how strong the government was and how long it was likely to last. Even a longer lasting government would struggle to make wide ranging and substantial reforms.”