Italian Prime Minister Mario Draghi resigns after the coalition collapses

Rome-Italy’s Prime Minister Mario Draghi submitted his resignation to President Sergio Mattarella on Thursday after his unified government collapsed, plunged the country into political turmoil and hit financial markets.

In a statement, Mattarella’s office said the head of state “paid attention” to his resignation and urged Draghi to maintain his position as a caretaker.

The statement did not say what Mattarella would do next. Political sources said earlier this week that he was likely to dissolve Congress and hold an early election in October.

Mattarella will meet with the chairs of both houses on Thursday afternoon.

The Italian coalition collapsed on Wednesday, and three of Draghi’s key partners gnawed a distrust resolution he called to end the division and renew their painstaking alliance.

Mario Draghi resigns
Italy’s Prime Minister Mario Draghi is watching during a speech to the House of Representatives prior to voting for confidence in the government after offering to resign in response to a rebellion by a coalition partner in Rome last week. 2022. (Remo Casiri / Reuters)

The political crisis overturned Italy’s months of stability, during which time the respected former central banker Draghi helped shape Europe’s harsh response to Russia’s invasion of Ukraine, raising its position in the financial markets. I did.

Italian bonds and stocks plummeted on Thursday, just as the market was preparing for the first rate hike from the European Central Bank since 2011.

In early trading, benchmark 10-year Italian bond yields jumped above 20 basis points to a high in more than three weeks and Italian stocks fell 1.8%.

“It will have a huge impact on Italy’s ability to implement policy and reform in the short term,” said Lorenzo Kodgno, head of LC Macro Advisor and former Italian Treasury official. “Early elections can be delayed and confusing and can run out of budget by the end of the year.”

Simultaneous fracture

Draghi had already offered to resign last week after one of his partners, the Populist Five Star Movement, did not support him in a vote of no confidence in measures to tackle high living costs.

Mattarella refused to resign and told him to come before Congress to see if he could continue the broad coalition until the end of Congress scheduled for early 2023.

In his speech to the Senate, Draghi appealed for unity and raised a series of problems facing Italy, from the war in Ukraine to social inequality and rising prices.

However, the five-stars decided again not to support him, saying he hadn’t addressed their core concerns.

In addition, right-wing Forza Italia and league parties said they wanted a commitment that Draghi would be willing to build a new government with new policy priorities without five stars, and decided to avoid voting. Did.

Opinion polls show that Conservative parties, including the right-wing Italian Brothers of Italy, are likely to win ballots.

By Crispian Balmer, Giuseppe Fonte, Angelo Amante