Italy was plunged into political turmoil on Thursday when prime minister Mario Draghi offered to resign after a split in his national unity government.
The former European Central Bank president said the conditions were no longer in place for him to carry on after the populist Five Star Movement refused to support his government in a critical parliamentary vote.
His resignation was quickly rejected by Italy’s president Sergio Mattarella, who asked Mr Draghi to address parliament next week to assess how much support his government would have. The rejection creates time for Italy’s political class to try to patch together a compromise to prevent the country from being tipped into early elections.
But the day’s events raise increasing doubts over the longevity of the broad coalition that Mr Draghi has led since early 2021.
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“The majority of national unity that had supported this government since its creation is no longer there,” Mr Draghi said in a statement as he offered to resign.
“From my inauguration speech, I have always said this executive would only go forward if there was a clear prospect of being able to carry out the government programme on which the political forces had voted their confidence,” he said. “Those conditions no longer exist.”
Italian stocks sold off on Thursday, with a FTSE gauge of equities in the country sliding 3.4 per cent. The yield on Italian 10-year government bonds rose 0.11 percentage points to 3.24 per cent, sending the gap with German 10-year yields higher as investors demand a rising premium for holding Italian debt.
The crisis was triggered after Five Star — the second-largest party in parliament — boycotted a vote on Thursday on a €26 billion package aimed at shielding Italians from the impact of worsening inflation.
Five Star’s leader Giuseppe Conte said he could no longer support Mr Draghi’s government, which he accused of not doing enough to help families facing surging food and energy costs.
“I have a strong fear that September will be a time when families will face the choice of paying their electricity bill or buying food,” Mr Conte said after a party meeting on Wednesday.
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Despite the boycott by Five Star politicians the aid package was approved in the Italian senate by a comfortable majority. However, Mr Draghi had previously said he would only lead a national unity government, and would not continue without Five Star, which was the largest party in parliament until a split last month.
The uncertainty comes at a sensitive time for Italy, which is expected to be the largest single recipient of the EU’s €750 billion Covid-19 recovery fund.
Early elections would raise doubts about Italy’s ability to pass its budget in the autumn and enact critical reforms to help accelerate the country’s long-term growth trajectory — on which dispersal of the EU money depends.
Paolo Gentiloni, the EU’s economy commissioner, told Italian media that Brussels was watching the political crisis “with worried amazement”.
Enrico Letta, leader of the centre-left Democratic Party, said politicians now had to come together to try to prevent Draghi from leaving office at a time of growing economic difficulties.
“Now there are five days to work so that the parliament confirms its loyalty to the Draghi government and Draghi and Italy exits as quickly as possible from this dramatic screw-up,” he wrote on Twitter.
Mr Draghi, who as ECB president was credited with saving the euro during the euro zone financial crisis a decade ago, was last year asked by Mr Mattarella to become the prime minister to lead the country still reeling from the pandemic. — Copyright The Financial Times Limited 2022