Draghi's Rhine Group and Italy's quiet growth problem

Mario Draghi, the former European Central Bank president and former Italian prime minister, has formed what Euronews is calling the Rhine Group, a new initiative aimed at addressing Europe's structural economic weaknesses. According to Euronews, which spoke with the group's executive director Luis Garicano, the effort is focused on fixing European competitiveness — a word that lands with particular weight when applied to Italy, whose GDP grew by just 0.54 percent in 2025.

That figure, drawn from World Bank data, is not a contraction, but it is a pace that offers little room for manoeuvre. At roughly half a percentage point of annual growth, the economy is expanding more slowly than the eurozone average that Draghi's group is implicitly trying to lift. For Italian households, growth at this rate means that living standards improve only marginally from one year to the next, and that the fiscal space needed to invest in infrastructure, education or the green transition remains narrow.

Inflation, at 1.53 percent in 2025, is running below the ECB's two-percent target. That sounds benign, and in one sense it is: it means real wages are not being eroded by rising prices. But persistently low inflation can also signal weak domestic demand — consumers and businesses spending cautiously rather than confidently — which is consistent with the subdued growth figure.

Unemployment stood at 6.39 percent in 2025, a number that, taken alone, looks relatively contained by Italian historical standards. The concern economists and foreign observers raise, however, is structural: Italy's labour market has long been characterised by sharp regional disparities and high youth inactivity, neither of which a headline rate captures. The Rhine Group's stated mission of improving European competitiveness is, in part, a response to exactly this kind of gap between aggregate statistics and lived economic reality.

The euro's recent trajectory adds a further complication. Against the dollar, the single currency has moved from 1.1485 on 31 July to 1.1643 on 28 August — a gain of roughly 1.4 percent in a single month. A stronger euro makes Italian exports more expensive in dollar-denominated markets, from American importers of Italian machinery and food to buyers across Asia. Against the Chinese yuan, the euro stood at 7.8251 on 28 August, and against the pound at 0.8572, meaning Italian goods face a meaningful price headwind in two of the country's most important trading relationships.

The Rhine Group's timing is therefore not incidental. Euronews reports that Garicano framed the initiative's urgency around the question of why now — and the answer implicit in the data is that the window for structural reform in Europe is narrowing. Italy enters September with parliament about to reconvene and a budget law to draft. The government will need to reconcile its debt obligations with any ambition to invest, and it will do so against a backdrop of sluggish growth and a currency that is working against its exporters.

What Draghi's group can realistically deliver remains to be seen. Euronews notes that the initiative's methods and governance are still being defined. But for Italy, the significance is partly symbolic: the country's most internationally recognised economic policymaker is, in effect, diagnosing from outside government the same structural ailments that domestic policymakers have struggled to treat from within. Whether the Rhine Group produces binding recommendations or remains an advisory forum, its existence is a signal that Europe's centre of gravity on economic reform has not stood still over the summer.