Italy’s populist Five Star Movement has refused to back Prime Minister Mario Draghi’s unity government in a critical parliamentary vote, plunging the country into a new round of political turmoil.
Draghi is now meeting with President Sergio Mattarella and could potentially offer his resignation.
Five Star – the second largest party in Parliament – on Thursday boycotted voting on a €26 billion package aimed at protecting Italians from the effects of worsening inflation.
Five Star leader Giuseppe Conte said he could no longer support Draghi’s bipartisan government, which he accused of not doing enough to help families facing rising food and energy costs.
“I am very afraid that September will be a time when families will be given the choice of paying their electricity bills or buying groceries,” Conte said after a party meeting on Wednesday.
Despite the five-star MP’s boycott, the aid package passed the Italian Senate with a comfortable majority. However, Draghi has repeatedly said he would only lead a unity government and would not proceed without Five Star, which was the strongest party in Parliament until a split last month.
Mattarella, who was reluctantly persuaded to a second term as president in January, will play a crucial role in deciding what happens next.
Italian stocks sold off Thursday morning, with a FTSE indicator for the country’s stocks falling more than 1 percent. The Italian 10-year government bond yield rose 0.16 percentage points to 3.3 percent, sending the gap with German 10-year yields to a monthly high as investors demand a rising premium for holding Italian debt.
The implosion of Draghi’s cross-party coalition, which could trigger earlier elections set for spring next year, would come at a sensitive time for Italy, which is expected to be the largest single recipient of the EU’s €750 billion Covid-19 recovery fund will be .
A government collapse and snap elections would cast doubt on Italy’s ability to pass its budget in the autumn and implement crucial reforms to accelerate the country’s long-term growth trajectory – on which the distribution of EU money depends.
Paolo Gentiloni, EU Economy Commissioner, told Italian media that Brussels was watching the political crisis “with concerned astonishment”.
Draghi, the former European Central Bank president who is credited with saving the euro during the 2010 eurozone crisis, was asked by Mattarella last year to become prime minister to lead the country still reeling from the pandemic.
As prime minister, he was credited with helping revitalize the ailing economy and overseeing an effective rollout of the Covid vaccine.
But Rome’s response to Russia’s invasion of Ukraine sparked new political tensions, given Italy’s historically close ties with Moscow.
Draghi was firmly opposed to the invasion and was a driving force in pushing for tough EU sanctions on Moscow. His Foreign Minister Luigi Di Maio, a member of Five Star, stood firmly behind him.
However, Conte, who preceded Draghi as prime minister, questioned whether military aid to Ukraine was only perpetuating the war. Tensions finally erupted last month when Di Maio left Five Star, taking with him about a third of the party’s lawmakers and reaffirming his support for Draghi’s government.
Amid speculation about Five Star’s impending withdrawal from government, Conte met with Draghi last week and presented several political demands, including the cancellation of a controversial waste incinerator proposed for the capital, Rome, to ease the deepening garbage crisis.
However, he said the government has not responded to his requests. “We are absolutely ready for dialogue to make our constructive contribution to the government, to Draghi, but we are not ready to write a blank check,” said Conte on Wednesday evening.
In parliament on Thursday, Five Star MPs accused Draghi of trying to dismantle some of their key populist welfare initiatives, including a citizen income scheme and public funding for renovations.
Other parties had indicated that they could call for snap elections and that it was untenable for Draghi to stay in power if Five Star left.
“If a coalition party does not support a government decree, enough is enough, it seems clear that we should go to elections,” said Matteo Salvini, leader of the right-wing Lega, ahead of the vote.