Government crisis in Italy
Prime Minister Draghi resigns
07/14/2022, 6:50 p.m
The government chaos in Italy is complete: although Prime Minister Draghi averts a vote of no confidence, he will resign from office. The 74-year-old declared the coalition of “national unity” to have failed.
Italy’s Prime Minister Mario Draghi wants to resign as a result of a government crisis. “I would like to inform you that tonight I will submit my resignation to the President of the Republic,” he said at a meeting of the Council of Ministers, his headquarters said. The coalition of “national unity” no longer exists.
The Five Star Movement (M5S), which is part of the governing coalition, had previously boycotted a confidence vote for a government project in the Senate. The vote was also about the future of Draghi’s government. M5S MPs refrained from expressing confidence in Draghi in the Senate in Rome. Before the vote, Draghi had announced that his government would not be able to continue without the support of the movement. The former head of the European Central Bank (ECB) then held talks with President Sergio Mattarella, which has already sparked speculation about a possible resignation.
New elections in Italy likely
The fact that the Five Star Movement of his predecessor Giuseppe Conte stayed away from the vote further fueled the government crisis. The Senate – the smaller chamber in the Italian two-chamber parliament – finally voted with 172 votes for a decree on billions in aid, which was linked to a vote of confidence. 39 MPs voted against. The decree provides billions in aid and investments for families and companies. But the five stars demand more money. Conte also sees demands such as the introduction of a minimum wage not being met.
President Mattarella can now dissolve parliament and order a new election. This could take place at the end of September or in October. Draghi could remain in office as managing director. Mattarella could also ask someone else to lead the government for the remainder of the legislature. However, a new election carries risks. Not only could the far-right Lega gain strength. Italy still has a number of deadlines to meet this year to receive billions in EU funds. In addition, the budget has to be approved, which usually happens in the last months of the year. Without a functioning government, this could fail.
Sell-off in Italian government bonds
Mattarella has a second option. To avoid a snap election and financial turmoil, Mattarella could seek to form a new unity government. This could appoint an independent figure to lead the government until the regular parliamentary elections in 2023. However, it is difficult to imagine that the previous partners in Draghi’s government would come together under a new prime minister.
The sell-off in Italian government bonds accelerated after the withdrawal announcement. The yield gap to the ten-year federal paper widened further. The political uncertainty comes at a time when Italy is grappling with multiple challenges, including a dependency on Russian natural gas and a drought in the country. In the EU, developments in Italy are being followed with concern and astonishment, said Economy Commissioner and former Prime Minister of Italy, Paolo Gentiloni, before Draghi’s announcement. At the present time, cohesion and stability are necessary.