Draghi on brink after coalition partners withdraw backing

Italian Prime Minister Mario Draghi’s government was unravelling on Wednesday evening as members of his national unity government walked out of parliament ahead of a vote of confidence in his leadership.

Matteo Salvini’s rightwing League, Silvio Berlusconi’s Forza Italia and the populist Five Star Movement said they would boycott the vote, saying Draghi had failed to give the Italian public adequate answers to pressing questions.

Draghi is expected to submit his resignation again to President Sergio Mattarella, which could trigger early elections and exacerbate a political crisis. This followed a previous offer to resign last week, which was rejected.

The collapse of the government followed a rancorous parliamentary debate on Wednesday when Draghi accused members of his coalition of seeking to subvert his policy agenda, even as they claimed to profess loyalty.

He had demanded the members of his coalition recommit to his reforms but his gamble backfired as the three biggest parties balked at his demands.

Draghi’s exit would come as Italy faces mounting economic and inflationary pressures, stemming from Russia’s invasion of Ukraine.

The prospect of protracted uncertainty could unsettle financial markets, the EU and the European Central Bank, which is set to begin a tightening cycle on Thursday that will raise Italy’s borrowing costs.

It also increases doubts about Italy’s ability to fulfil conditions laid down by the EU for the country to receive its €200bn share of the bloc’s €750bn coronavirus recovery fund. Italy has so far received €46bn with a further €21bn tranche due in the coming weeks.

Draghi’s resignation would leave an unfinished agenda of important economic reforms — including an overhaul of the tax, justice and procurement system — intended to make Italy a more attractive place to do business, and improve long-term growth.

It would now fall to a new government to push through the next phase of reforms to ensure that Italy can receive the funds it has been allocated.

A former ECB president, Draghi was tapped to form a new national unity government in February 2021 as Italy was reeling from the pandemic and one of western Europe’s biggest Covid-related economic contractions.

Draghi and his team revived the faltering Covid-19 vaccination programme, and oversaw last year’s economic rebound, with gross domestic product growing 6.6 per cent.

But the invasion of Ukraine put more pressure on the prime minister, given Italy’s historically warm ties to Russia. Draghi took a tough line against the invasion, vigorously condemning Moscow for undermining the international order.

But his stance, and his promise of military support for Ukraine unsettled members of his coalition, particularly Five Star, which has been traditionally sympathetic towards Moscow.