MILAN — Italy’s Prime Minister Mario Draghi resigned on Thursday morning, after his political partners withdrew their support.
The news impacted morale in a country grappling with rising costs, inflation and a resurgence of the COVID-19 pandemic. General elections, whose outcome appears to be very uncertain, are expected as early as October.
The political uncertainty dragged down Italy’s bonds and stocks. The country’s main index, the FTSE MIB, fell 2.07 percent to 20,905 by mid-morning, following the news.
The BTP-Bund spread rose 6.34 percent to 229 basis points. Shares in Unicredit bank fell more than 7 percent, Italy’s state postal service was down 6.41 percent and Telecom Italia lost 5.68 percent.
Italy’s coalition fell apart on Wednesday when three of Draghi’s main political party allies snubbed a confidence vote in the Senate to try and renew the alliance. Although Draghi won the vote, the left-leaning Five Star Movement, the Lega and Forza Italia parties said they wouldn’t take part, causing the government to collapse.
President Sergio Mattarella has reportedly asked Draghi to remain in place in the interim with a caretaker government.
Last week, Mattarella rejected Draghi’s resignation, convincing him to hold off for a few days and buying time in the hope that the political squabbles could be settled through a compromise. At the time, Draghi clearly said he had no intention of staying on if he did not have the full support of his partners.
Draghi, the former European Central Bank president, has brought political stability to Italy, the third largest economy in the euro zone, since his appointment in February 2021.
His international stance and prestige has received steadfast support from the fashion industry, as reported, and over the weekend, industrialists, union leaders, mayors and citizens signed open letters and petitions asking Draghi to remain in office. Italy also needs a solid government that can pass the reforms that are part of the 200 billion euro aid package it received from the European Union.
On Monday, luxury goods association Altagamma and Camera Nazionale della Moda Italiana issued a joint statement to “firmly express the need to give continuity” to the government headed by Draghi, “believing that all political parties, for the benefit of the country” should stand behind him. “This is what the country wants and it can’t be ignored.”
Confindustria Moda also lamented the “serious irresponsibility” and “mere electoral calculations” of political parties that damage the recovery of the country.
Draghi has also played an important role within the context of Russia’s invasion of Ukraine and the EU sanctions that have affected Italian households, causing a rise in consumer prices.