Italy: Prime Minister Mario Draghi resigns for the second time

Italy: Prime Minister Mario Draghi resigns for the second time

Snap elections are expected to be called in the fall following the x27;attempt to reunite troops failed.

Unable to win the opposition's vote of confidence, Italian Prime Minister Mario Draghi tendered his resignation.

Italian Prime Minister Mario Draghi tendered his resignation to President Sergio Mattarella on Thursday, the day after his governing coalition broke up, an announcement that raised the specter of a political crisis in Italy and weighed down the financial markets.

The Presidency of the Italian Republic said in a press release that Sergio Mattarella had taken note of this resignation and had instructed Mario Draghi to continue to manage day-to-day business.

This statement did not specify the intentions of the head of state but he should probably dissolve the Parliament and call early elections in the fall, according to political sources interviewed before the formalization of the resignation of Mario Draghi.

Sergio Mattarella is due to meet with the presidents of the two chambers of the Italian Parliament on Thursday afternoon.

The Italian governing coalition collapsed on Wednesday after three partner formations decided not to take part in the vote of confidence that Mario Draghi had requested in the hope to end the divisions and relaunch their alliance.

The new political crisis in germ puts an end to a period of relative stability in Italy. In power since February 2021, Mario Draghi has notably contributed to defining the European Union's firm response to Russia's offensive in Ukraine and has restored the country's image in the eyes of the financial markets.

The announcement of his resignation rattled Italian bond and equity markets, hours before the European Central Bank (ECB) carried out its first rate hike since 2011 to combat record inflation.

By mid-morning, the yield on Italian 10-year sovereign bonds gained more than 20 basis points, to a peak since June 28, while the Milan Stock Exchange fell around 2%.

It's a big blow to Italy's ability to implement short-term policies and reforms, said Lorenzo Codogno, head of at LC Macro Advisers.

If the former president of the European Central Bank obtained the confidence of the Senate on Wednesday, three parties of his government coalition abstained, dampening the hopes of avoiding early elections in a troubled international and economic context, especially since the current legislature is due to end in the first half of 2023.

The conservative parties Forza Italia and the League as well as the 5-Star Movement (M5S) did not participate in the vote, a week after a comparable boycott by the anti-system M5S party, which had prompted Mario Draghi to present his resignation for the first time – then refused by the president of the Republic, Sergio Mattarella.

Polls point to the conservative bloc as the favorite for the snap elections, with an expected advance from the far-right Brothers of Italy party – the only formation major who had refused to join the coalition.

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