Italy’s Prime Minister Mario Draghi
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Italy’s Prime Minister Mario Draghi is expected to resign Thursday, paving the way for fresh elections and opening a new chapter of political uncertainty.
Speaking to parliament, Draghi said he was going to speak to President Sergio Mattarella and inform him of his intentions after failing to unite his fragile coalition government.
Last week, Mattarella rejected Draghi’s first resignation and asked him to lead more negotiations with lawmakers in the hope of avoiding snap elections.
The left-leaning Five Star Movement, one of the parties in the coalition government, had opposed a new decree aimed at lowering inflation and battling rising energy costs. Italy’s lawmakers held a confidence vote on the wide-ranging policy package, but Five Star boycotted the move, angering both Draghi and the right-wing parties in the coalition.
Draghi, the former European Central Bank chief, was then asked to go back to the upper house of Parliament on Wednesday to hold a vote of confidence in the government itself, meaning Italian politics has been in a state of limbo for the last week.
Ahead of Wednesday night’s drama, the Five Star Movement said it wouldn’t take part in the new confidence vote. The ruling Lega party and the Forza Italia party also said they wouldn’t take part. Instead, the center-right had proposed a new vote on keeping the Five Star Movement out of the coalition.
Draghi managed to win the vote of confidence in the Senate but the snub by the coalition partners effectively means the government has collapsed. This paves the way for difficult and uncertain snap elections, which could take place in September or October.
Yields rise
Italian bond yields had cooled on Wednesday after Draghi signaled his intention to stay if the coalition government could be salvaged. But as the day progressed, and it became clear that there was still division between the different parties, yields climbed higher — meaning higher borrowing costs for Italy’s government.
Italy, a highly indebted southern European nation, is being closely watched by policymakers in Frankfurt at the European Central Bank, which is on the verge of launching a new tool to help highly indebted euro nations.
The yield on Italy’s 10-year government bond rose to a session high on Wednesday evening at 3.498%. The iShares MSCI Italy ETF, which tracks Italian stocks, slumped 4.8% on the day.
Months of stability
Hundreds of mayors signed an open letter over the weekend asking Draghi to stay. Union leaders and industrialists have also come together to ask Draghi to remain in office. Meanwhile, thousands of citizens have also signed an online petition asking Draghi to stay, according to AP.
Technocrat leader Draghi had brought political stability to Italy for the last 15 months, which has been crucial in receiving pandemic recovery funds amounting to almost 200 billion euros ($205 billion).
His leadership had also been important within the context of Russia’s invasion of Ukraine, with Draghi playing a role in EU sanctions and supporting Italian households dealing with higher consumer prices.
This is a breaking news story and it is being updated.
