Italian government on brink of collapse as PM Draghi offers resignation

London: Italy has been plunged into political uncertainty after Prime Minister Mario Draghi offered to resign just hours after his coalition partner, the populist Five Star Movement, withdrew its support for a major economic package.

But Draghi’s resignation was quickly rejected by President Sergio Mattarella, who has asked the embattled prime minister to address parliament next week to assess how much support his government would have.

Italian Prime Minister Mario Draghi had his resignation rejected by the Italian president.Credit: Bloomberg

The crisis in the European Union’s third-largest economy was triggered when Five Star leader Giuseppe Conte boycotted the government’s €23 billion ($34 billion) package of economic aid for families and businesses, arguing Draghi was not doing enough to tackle the cost-of-living crisis.

The development threatens major instability within the EU while the bloc is attempting to unite against Russia’s aggression in Ukraine and wean itself off a heavy reliance on Moscow’s oil and gas.

Draghi, the former European Central Bank president credited with saving the euro during the 2010 eurozone crisis, has led a unity government since February 2021.

The 74-year-old was appointed last year by Mattarella to save Italy from its endemic instability and lead the post-pandemic recovery.

In a statement on Friday morning (AEST), Draghi said the trust that had sustained the unity government had gone.

Italy, one of Europe’s COVID-19 hotspots, was hit particularly hard by the pandemic.Credit: AP

“The majority of national unity that had supported this government since its creation is no longer there,” Draghi said.

“From my inauguration speech, I have always said this executive would only go forward if there was a clear prospect of being able to carry out the government program on which the political forces had voted their confidence. Those conditions no longer exist.”

The government and the future of Draghi’s premiership is now in limbo, but the rejection of his resignation provides time for the political class to try to shore-up a compromise and stop the country from being tipped into early elections.

Draghi’s government still won the Senate vote comfortably, but his resignation followed his comments earlier in the week saying that without Five Star’s support, he could not continue to lead.

Elections were due early next year, but the crisis means they could be held as early as September or October.

The uncertainty comes at a sensitive time for Italy, which is expected to be the largest single recipient of the EU’s €750 billion COVID-19 recovery fund. If the government is unable to pass its budget later this year, it could jeopardise funding.

Five Star was originally the largest party in the coalition, but has seen a string of defections and falling support. Former party leader Luigi di Maio has accused the party of a cynical plan to bring down the Draghi government to revive its own support, while dragging the country to economic and social collapse.

The Italian economy – like most economies worldwide – is struggling to recover from the pandemic, while also being hit afresh by a cost-of-living crisis.Credit: Bloomberg

As prime minister, Draghi was credited with helping revive the battered economy and supervising an effective coronavirus vaccine rollout.

However, his response to Russia’s invasion of Ukraine sparked new domestic political tensions given Italy’s historically close ties to Moscow.

Draghi took a strong stand against the war and was a driving force in pushing for tough EU sanctions against the Putin regime. Maio, now his foreign minister, has stood firmly behind him.

But Conte, who preceded Draghi as prime minister, has openly questioned whether military aid to Ukraine was perpetuating the war.

Tensions erupted last month when Maio walked out of Five Star, taking about a third of the party’s MPs with him, and reaffirming support for Draghi’s government.

Conte said he could no longer support Draghi’s cross-party government, which he accused of not doing enough to help families facing surging food and energy costs.

“I have a strong fear that September will be a time when families will face the choice of paying their electricity bill or buying food,” Conte said.

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