Draghi, who is facing the threat of collapse of the Italian government, met with the president

ROME, July 14 (Reuters) – Italian Prime Minister Mario Draghi’s coalition government appeared on the verge of collapse on Thursday after one of its members, the 5 Star Movement, failed to support a confidence vote in parliament, including measures to offset living expenses. crisis.

Minutes after the vote, Draghi traveled to Rome’s Quirinale Palace to meet with President Sergio Mattarella, the supreme arbiter of Italian politics who will have to decide how to resolve the crisis.

It was not clear whether Draghi, 74, the former head of the European Central Bank (ECB), planned to offer his resignation.

The confidence vote has become a focus of tension within Draghi’s broad coalition as his parties prepare to face each other in national elections due in early 2023.

Draghi upped the ante 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 collapsed and lost public support.

The confidence vote, passed by 39 to 172, was used to speed up parliamentary clearance of a multibillion-euro aid package, including a provision allowing the city of Rome to build a giant waste incinerator. read more

5-Star is pushing Draghi to do more to help reduce rising living costs by increasing government debt and has long opposed the incinerator project.

EARLY ELECTIONS?

The 5-star decision plunged Italy into political uncertainty and risks undermining efforts to access billions of euros in European Union funds, fight a damaging drought and reduce its dependence on Russian gas.

It could also lead to national elections in September or October.

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

Risks of Draghi’s government collapsing sent ripples through financial markets, where Italian bond yields rose sharply, suggesting investors were demanding a higher premium to hold debt and stocks fell.

The vote comes at a difficult time for Italy, the euro zone’s third-largest economy, where borrowing costs have risen sharply as the ECB began tightening monetary policy.

The ECB is working on a new tool to keep the gap between Germany’s borrowing costs and those of highly indebted member states such as Italy.

Draghi, Italy’s sixth prime minister in the past decade, has given assurances that Italy will respect any terms on the new mechanism, but his departure will create new uncertainty.

Written by Keith Weir; Edited by Crispian Balmer and Alison Williams

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