Draghi meets the president as the Italian government faces collapse

ROME (Reuters) – Italian Prime Minister Mario Draghi’s coalition government looked on the verge of collapse on Thursday after the Five Star Movement, one of its members, failed to support a vote of confidence in parliament, including measures to offset the cost of living. crisis.

Within minutes of the vote, a government source said, Draghi went to Rome’s Quirinale Palace to meet President Sergio Mattarella, the supreme ruler in Italian politics, who will have to decide how to resolve the crisis.

It was not clear if former European Central Bank chief Draghi, 74, planned to resign.

The vote of confidence has become a focal point of tensions within Draghi’s broad coalition as its parties prepare to fight each other in national elections due by early 2023.

Draghi raised the stakes by saying he would not want to lead a government without 5-Star, which emerged as the largest party in the previous election in 2018 but has since suffered from defections and a loss of popular support.

The vote of confidence, which passed 172 to 39, was used to speed up parliamentary approval of a multibillion-euro aid package that also includes a provision allowing the city of Rome to build a giant waste incinerator. Read more

5-Star pressured Draghi to do more to help mitigate the rising cost of living by increasing government borrowing, and he has also long opposed the Holocaust project.

Early elections?

The five-star decision plunged Italy into political uncertainty and risks undermining efforts to secure billions of euros in European Union funds, tackle a devastating drought and reduce its dependence on Russian gas.

It could also lead to national elections as early as September or October.

Italy is due to vote in the first half of next year, and tensions are rising between members of an alliance that has existed since early 2021 and straddles both sides of the political divide.

Risks of a Draghi government collapse spread across financial markets as Italian bond yields rose sharply, indicating investors demanded a higher premium for holding debt, and stocks slumped.

The vote comes at a difficult time for Italy, the third largest economy in the euro zone, as borrowing costs have risen sharply as the European Central Bank begins to tighten monetary policy.

The European Central Bank is working on a new tool to contain the difference between German borrowing costs and borrowing costs in heavily indebted member states such as Italy.

Draghi, Italy’s sixth prime minister in the past decade, was seen as offering reassurances that Italy would honor any conditions attached to the new mechanism, but that his departure would create new uncertainty.

Written by Keith Weir. Editing by Crispian Palmer and Alison Williams

Our criteria: Thomson Reuters Trust Principles.