Does Renzi owe his job to Draghi?

(EPA)

Do last week’s German constitutional court ruling lambasting – but failing to overturn – the ECB’s crisis-fighting bond-buying programme and Matteo Renzi’s ousting of Italy’s prime minister Enrico Letta have anything in common?

In the view of many ECB critics, particularly in Berlin, the two are not only related, but one may have caused the other.

The German government has always had a bit of a love/hate relationship with the bond market throughout the four-year-old eurozone crisis. On the one hand, it regarded sovereign bond holders as greedy opportunists looking for German taxpayers to bail out their bad bets. On the other hand, those same traders were a useful tool to keep pressure on wayward governments – particularly Italy – that were in dire need of economic reforms to spur growth.

In the view of many German critics, there has been no serious effort by the Italian government – be it in the fading months of Mario Monti’s premiership or during Enrico Letta’s foreshortened tenure – to undertake major economic reforms since ECB boss Mario Draghi first announced he would do “whatever it takes” to save the euro in July 2012.

The bond-buying progamme that the German constitutional court grumbled about last week – known as Outright Monetary Transactions – was the product of that speech 18 months ago and has kept the crisis at bay ever since, helping keep Italian borrowing costs near pre-crisis levels.

The end of such market-driven pressure, these critics argue, has allowed Rome to return to the petty political intrigue that preoccupied Italian ruling classes in the months and years before bond yields rose dangerously close to 7 per cent in early 2012. Indeed, Letta’s government spent almost its entire tenure on the verge of collapse, first under attack from Silvio Berlusconi on the right and now, fatefully, from within Letta’s own centre-left party.

Thus far, German officials have kept their OMT-related Italy complaints private, but Jeroen Dijsselbloem, the Dutchman who chairs the eurogroup of his fellow eurozone finance ministers, hinted at such concerns on Thursday, saying Rome needed to focus on reform rather than political turmoil: “I don’t think Italy can afford that and I don’t think any country can really afford that,” he told Reuters.