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 coalition 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 bitter collapse of the government followed a rancorous parliamentary debate on Wednesday, with Draghi accusing 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 themselves to his reforms but his gamble backfired as the three biggest parties balked.

“We were expecting answers from you for businesses and households, for students facing rising petrol prices, workers paying higher utility bills, and even taxi drivers — but nothing,” Stefano Candiani, a senator from the League, told parliament, announcing the party’s decision to boycott the vote of confidence.

Italy’s latest political crisis comes as the country faces mounting economic and inflationary pressures, stemming from Russia’s invasion of Ukraine.

The prospect of protracted uncertainty is likely to 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 over Italy’s ability to fulfil conditions laid down by the EU for receipt of 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 exit would leave an unfinished agenda of important economic reforms — including overhauls of the tax, justice and procurement systems — intended to make Italy a more attractive place to do business, and improve long-term growth.

“Pivotal structural reforms, necessary for the EU recovery fund’s next instalment to arrive, have not been completed,” said Giuliano Noci, a business strategy professor at Milan Politecnico. “This could realistically derail the recovery plan.”

Noci said that Draghi was also playing a key role in the western alliance against the Russian invasion of Ukraine, and his departure would have geopolitical implications. “He has become a reference point for Europe in the Nato camp, and without him the situation will complicate further.”

A former ECB president, Draghi was tapped to form a new national unity government in February 2021 as Italy reeled from Covid-19 and suffered one of western Europe’s biggest pandemic-related economic contractions.

Draghi and his team revived the faltering Covid 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.