Italian PM Draghi resigns after coalition falls apart

Thu, Jul 21, 2022
By editor


ITALIAN Prime Minister Mario Draghi handed in his resignation to President Sergio Mattarella on Thursday after his unity government fell apart, plunging the country into political turmoil and hitting financial markets.

Mattarella’s office said in a statement that the head of state had taken note of the resignation and asked Draghi to remain in a caretaker capacity.

The statement did not say what Mattarella would do next.

Political sources had said earlier this week that he would likely dissolve parliament and call for early elections in October.

Mattarella planned to meet the speakers of both houses of parliament on Thursday afternoon.

Italy’s coalition crumbled on Wednesday when three of Draghi’s main partners snubbed a confidence vote he had called to try to end divisions and renew their fractious alliance.

The political crisis has up-ended months of stability in Italy, during which the respected former central banker Draghi helped shape Europe’s tough response to Russia’s invasion of Ukraine and boosted the country’s standing in financial markets.

Italian bonds and stocks sold off sharply on Thursday just as markets were bracing for the first interest rate hike from the European Central Bank since 2011.

In early trade, benchmark 10-year Italian bond yields soared over 20 basis points to their highest in over three weeks and Italian stocks (FTMIB) opened down 1.8 per cent.

“It is a big blow to Italy’s ability to deliver policies and reforms over the near term,” said Lorenzo Codogno, head of LC Macro Advisors and a former senior Italian Treasury official.

“There will be delays and disruptions with early elections, and most likely no budget by year-end.’’

Draghi had already tendered his resignation last week after one of his partners, the populist 5-Star Movement, failed to back him in a confidence vote on measures tackling the high cost of living.

The president’s office said on Thursday that Draghi’s government would remain in place for the time being to handle current business, but further steps about Italy’s political future were not outlined.

Before meeting Mattarella, Draghi told lawmakers he saw no possibility of continuing to govern after failing to receive broad backing in a Senate confidence vote on Wednesday night.

The former president of the European Central Bank, who is credited with saving the euro in 2012, has helmed a broad coalition in the eurozone’s third-largest economy since February 2021.

It includes parties that often do not cooperate but came together to show unity in the midst of the Coronavirus pandemic. (Reuters/NAN)