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Mario Draghi said on Thursday he would resign as Italy’s prime minister after a political party in his ruling coalition in Rome refused to participate in a confidence vote earlier in the day.
“I will submit my resignation to the president of the republic this afternoon,” Draghi told the cabinet, according to a statement translated by Reuters, throwing Italian politics back into a fragile state of affairs.
“The coalition of national unity that supported this government no longer exists,” he said.
The Five Star Movement, one of the parties in Draghi’s coalition government, opposed a new decree aimed at reducing inflation and combating rising energy costs. Analysts, however, argued that opposition to this policy package is not so much ideological as the result of intra-party disputes.
Italy’s MPs held a confidence vote on the broad policy package on Thursday. Five Star boycotted the vote despite Draghi previously threatening to resign if the party did not support it.
“The M5S move was largely driven by turmoil in the ailing party rather than substantive policy differences with the executive,” Wolfango Piccoli, co-chairman of consultancy Teneo, said in a note on Thursday.
Draghi has been in power since February 2021 and has led a government formed by several parties and technocrats aimed at bringing stability to the southern European nation, which has often been plunged into new rounds of political chaos.
Bond yields are rising
Draghi has consistently pushed for a reform agenda and his work has eased earlier concerns among investors about the stability of Italy’s economy. But this new setback risks efforts to secure post-pandemic capital from the EU and also comes as Europe pushes hard to divest itself of Russian hydrocarbons. Italy is due to have new parliamentary elections before June 2023, but the latest uncertainty in Rome could bring that forward. Draghi, although he still has a majority in the Italian parliament without the support of the Five Star Movement, has previously said he would not be available to lead another executive. Italian bond yields rose in the session ahead of Draghi’s announcement and Italy’s FTSE MIB was down 3.3% by the close, with banking shares falling.
