Mario Draghi addressing Italy’s parliament on Thursday
(Picture: AP)Mario Draghi has resigned as Italian prime minister after coalition allies boycotted a confidence vote, signalling the likelihood of early elections.
Having last week had his offer to resign rejected by Sergio Mattarella, the 74-year-old again approached the president on Thursday.
Italy’s government has been in crisis since the withdrawal of support for his coalition governance by the Five Star Movement - the largest party in parliament - on July 14.
Mr Mattarella’s office said the president had “taken note” of the resignation and asked Mr Draghi’s government to remain on in a caretaker fashion.
Italy's coalition crumbled on Wednesday when three of Mr Draghi's main partners snubbed a confidence vote he had called to try to end divisions and renew their fractious alliance.
The political crisis has up-ended months of stability in Italy, during which respected former central banker Mr Draghi had helped shape Europe's tough response to Russia's invasion of Ukraine and had boosted the country's standing in financial markets.
Italian bonds and stocks sold off sharply on Thursday just as markets were bracing for the first interest rate hike from the European Central Bank since 2011.
"It is a big blow to Italy's ability to deliver policies and reforms over the near term," said Lorenzo Codogno, head of LC Macro Advisers and a former senior Italian Treasury official.
"There will be delays and disruptions with early elections, and most likely no budget by year-end."
In a speech this week to the Senate, Mr Draghi made a plea for unity and set out a series of issues facing Italy ranging from the war in Ukraine to social inequality and rising prices.
But Five Star once again decided not to back him, saying he had not addressed their core concerns.
In addition, the rightist Forza Italia and League parties decided to shun the vote, saying they wanted a commitment that Mr Draghi was willing to forge a new administration without Five Star and with fresh policy priorities.
Polls say the conservative bloc, which includes the far-right Brothers of Italy party, would likely win a ballot.
