Draghi quits as prime minister, leaving Italy in political chaos

ROME • Mr Mario Draghi resigned as Italy's prime minister, throwing the country into turmoil and putting it on course for snap elections as soon as early October.

The former European Central Bank (ECB) chief delivered his decision to President Sergio Mattarella yesterday morning.

The government will continue in a caretaker role to handle ongoing business but its influence will be minimal.

Mr Mattarella, who accepted the resignation, was to meet yesterday afternoon with the speakers of both houses of Parliament to agree on the next steps, which will likely include an emergency vote after the summer.

The ballot may take place on Oct 2. Elections during the autumn are unprecedented in Italy, a time when Parliament is usually preparing the annual budget.

Italy's benchmark stock index fell 2.2 per cent and Italy's key bond yield jumped.

The resignation throws the country into turmoil just as Europe is bracing itself for a recession and Italians are contending with a brewing energy crisis.

Mr Draghi, the star economist, was never directly elected but won the backing of almost all political parties when he took office in February last year and raised Italy's profile on the international stage as a respected leader in the European Union and Group of Seven.

He was tasked with battling the coronavirus pandemic and the aftermath of a recession in Europe's third-largest economy just as Italy was awarded a vast part of an unprecedented EU recovery package worth billions of euros to boost growth.

People who saw him at work at the ECB say he was a skilful negotiator with sharp political antennas, and ready to play "bad cop" to sway decisions in his favour, a former aide told AFP.

Mr Draghi is someone who does not accept "lame compromises" for the sake of maintaining consensus, the aide said.

Lawmakers - now without the discipline imposed by the ex-central banker dubbed "Super Mario" - will need to agree on reforms in order to unlock 200 billion euros (S$286 billion) in EU aid.

The collapse of Mr Draghi's government was inevitable after three of his coalition partners withdrew their support in a confidence vote on Wednesday.

Italy's problems reached a boiling point last week when the Five Star Movement, a key coalition partner, boycotted a confidence vote.

Mr Draghi said he no longer had broad backing and threatened to resign unless all the members in the unity government pledged their support.

Instead, Mr Matteo Salvini's League and Mr Silvio Berlusconi's Forza Italia joined Five Star in abandoning Mr Draghi on Wednesday after a heated Senate debate, leaving the prime minister few options other than to quit his post.

Italian governments are notoriously unstable and Mr Draghi led the 67th government the country has had in just over 75 years.

And while Mr Draghi will likely remain caretaker prime minister until the next vote, the government will be dramatically weakened, putting its legislative agenda at risk.

Mr Paolo Gentiloni, the EU's economy commissioner, warned late on Wednesday that "a perfect storm" could lie ahead for Italy. The EU will have to assess how the political upheaval will affect the country's planned reforms and whether it can unlock its pandemic aid according to the agreed timeline.

Tensions had been mounting between the prime minister and Five Star leader Giuseppe Conte, a former prime minister who has been critical of Mr Draghi's response to the economic crisis and the government's stance on shipping weapons to Ukraine.

Five Star splintered last month when members could not agree on how much support to give Kyiv.

Italian parties have now entered campaign mode.

Based on current polls, a right-wing tie-up led by Ms Giorgia Meloni's Brothers of Italy would win a snap election if its members stick together.

Even though Five Star triggered the collapse by withdrawing government support last week, its influence is poised to wane. The party's popularity has plummeted since it entered government and it would likely lose seats in a new election.

BLOOMBERG,  AGENCE FRANCE-PRESSE