Mario Draghi resigns after weeks of political chaos

Rome  — Italian Prime Minister Mario Draghi quit on Thursday after his national unity government fell apart, setting the country on course for an early election and shaking financial markets.

Draghi, an unelected former central banker who has led a broad coalition for almost 18 months, tendered his resignation in a meeting with President Sergio Mattarella.

Mattarella plans to meet the speakers of both houses of parliament later on Thursday. Political sources said earlier this week that he would probably dissolve parliament and call early an election in October.

He has asked Draghi to stay on in a caretaker capacity.

A bloc of conservative parties, led by the far-right Brothers of Italy, looks likely to win a clear majority at the next election, a study of opinion polls showed this week.

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

He had tried to reassert his authority as parties began to pull in different directions before the planned end of the legislature in the first half of next year.

The political crisis has upended months of stability in Italy, during which Draghi had helped shape Europe’s tough response to Russia’s invasion of Ukraine and had boosted the country's standing in financial markets.

Ukrainian President Volodymyr Zelensky thanked Draghi for his “unwavering support”.

“I'm convinced that the active support of Italian people for Ukraine will continue,” he said on Twitter.

Draghi drew warm applause from legislators when he made a brief appearance in the lower house of parliament on Thursday.

“Even central bankers have their hearts touched sometimes,” he quipped as he received the ovation.

Here we go again

Draghi claimed he had backing from Italians to carry on as prime minister and steer the country through what looks like being a tough winter.

“The fact that there is yet another government crisis only certifies the umpteenth inability of our politicians to govern for the people, and instead govern only for themselves,” said Marco Anastasi,  a gym instructor from Milan.

Italian bond and stocks sold off sharply on concerns that the political crisis would delay reforms needed as Italy taps into post-pandemic recovery funds from the EU.

The Italian 10-year government bond yield shot up more than 20 basis points to 3.744%, its highest level for four weeks after the European Central Bank raised the cost of borrowing.

“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 Advisers and a former senior Italian Treasury official. “There will be delays and disruptions with early elections, and most likely no budget by year-end.”

In a first impact from Draghi’s resignation, political parties are set to drop plans to reform business licences for taxi drivers, according to political sources. The issue had sparked protests in Rome in recent days.

In a sign of the tensions brought to the surface by the end of the Draghi government, two ministers from Forza Italia said they would leave the centre-right party in protest.

Public administration minister Renato Brunetta and Mariastella Gelmini, minister for regional affairs, both quit the party led by Silvio Berlusconi.

Reuters