Italian Prime Minister Mario Draghi said on Thursday that he would resign after a party in his ruling coalition, the 5-Star Movement, did not support a vote of confidence, throwing the country into political chaos.
Draghi told the cabinet, according to a statement from his office, “I will give my resignation to the president of the republic this evening.”
“The national unity coalition that supported this government no longer exists,” said Draghi, who used to be president of the European Central Bank and has been prime minister of a broad coalition since February 2021.
The vote of confidence had become a source of tension in Draghi’s government, whose parties are getting ready to fight each other in a national election set for early 2023.
The 5-Star party’s decision to skip Thursday’s vote of confidence set off a chain of events that led Draghi, who is 74 years old, to say he would step down.
Draghi had said he wouldn’t want to lead a government without 5-Star, which was the largest party in the last election in 2018, but has lost members and support since then.
Sergio Mattarella, the Italian president and the most powerful person in Italian politics, is now in the centre of things.
He must decide whether to try to convince Draghi to try to form a new government, find a new caretaker leader to take Italy to elections next year, or call early elections.
Since World War II, Italy has not had an election in the fall because that is when the budget is usually made and approved by parliament.
Risks of a Draghi government falling reverberated through the financial markets on Thursday. Italian bond yields rose sharply, which shows that investors want to pay more to hold its debt, and shares fell to their lowest levels since late 2020.
Italy, which has the third largest economy in the euro zone, is having a hard time right now because its borrowing costs have gone up sharply as the ECB starts to tighten its monetary policy.
The ECB is making a new tool to keep German borrowing costs from being too different from those of highly indebted member states like Italy.
Draghi, who was Italy’s sixth prime minister in the last ten years, was seen as a reassurance that Italy would follow any rules that came with the new mechanism. However, his departure would create more uncertainty.