Italy enters crunch week with Mario Draghi’s coalition government on the brink

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Prime Minister Mario Draghi is under mounting pressure to reverse his pledge to resign as soon as this week and avoid throwing Italy into chaos as economic warning signs are building.

The former European Central Bank chief will address lawmakers on July 20, when he’ll declare his intention to either give his fractious coalition another try or quit government. So far, he’s still determined to resign, according to people familiar with the matter.

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Matteo Renzi, the head of coalition party Italia Viva and a former prime minister, launched a petition for Draghi to stay over the weekend that got more than 70,000 supporters in a few hours.

Business lobbies and local administrations joined the call for the prime minister to remain.

Draghi still has three days to change course and decide to stay, which he has indicated he would only do if he has the backing of his alliance. A resignation would throw the country into turmoil just as Europe is bracing for a recession, Italians are contending with rising inflation and lawmakers need to pass reforms to unlock 200 billion euros ($202 billion) in aid from the European Union.

Coalition split

The prime minister’s problems came to a flash point last week when coalition partner Five Star Movement, led by Giuseppe Conte, effectively abstained in a confidence vote in the senate.

Tensions have been mounting with Conte, a former prime minister who has been critical of Draghi’s response to the economic crisis and has opposed the government’s stance in shipping weapons to Ukraine. The Five Star party split last month when members couldn’t agree on how much support to give Kyiv.

Draghi would consider continuing as prime minister if all alliance groups, including Five Star, backed his initiatives, said one of the people, who asked not to be identified because the deliberations are private. So far in public, Conte hasn’t shown any movement toward reconciliation.

Over the weekend, Conte laid the blame for the impasse squarely on Draghi, saying that the prime minister had offered only “generic answers” to Five Star requests for more social spending. Without concrete plans to address those issues, “we won’t be able to shoulder any government responsibility, he said.

Snap election

Support from other parties in government, such as Matteo Salvini’s League, may also be wavering -- he’s already threatened to leave the alliance. Galvanized by the prospect of fresh elections that would benefit center-right parties, Salvini could be tempted to throw his lot in with a new coalition.

Based on current polls, a center-right tie-up led by Giorgia Meloni’s Brothers of Italy would win if its members stick together.

If Italian President Sergio Mattarella were to call a new election, the vote would have to happen within 70 days. That may be a scenario Five Star would like to avoid, however, since its popularity has plummeted since it entered government and it would likely lose seats.

On Monday, Draghi will travel to Algeria, where he is expected to sign a new deal to further boost gas supply. The trip will be key for Italy’s efforts to diversity its energy imports away from Russia following Moscow’s invasion of Ukraine and is among the reasons why Mattarella rejected Draghi’s resignations last week, the people said.

Read more: Italian PM Mario Draghi wins confidence vote but coalition in doubt

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