(Bloomberg) -- Mario Draghi is facing the biggest coalition turmoil since he became Italy’s prime minister in 2021, just as he sets out for a week of back-to-back international summits that will focus on Russia’s war in Ukraine.
Foreign Minister Luigi Di Maio, one of the highest-profile members of Draghi’s cabinet, on Tuesday acrimoniously quit the Five Star Movement that he once led following a weeks-long clash with current party leader Giuseppe Conte over Italy’s military support to Ukraine.
While the snap move does not threaten Draghi’s support in Parliament, it does change the balance of power in his broad coalition with Matteo Salvini’s League now becoming the biggest party in the alliance. That could in turn make it harder for Draghi, who became premier in February 2021, to push through ambitious reforms that include overhauling the country’s fiscal framework -- something Salvini opposes.
The heightened turmoil is a stark reminder of Italy’s fragile political balance and comes just as Draghi, a former head of the European Central Bank, leaves the country for a string of events starting with the June 23-24 European Union summit in Brussels, followed by a Group of Seven gathering in Germany and a NATO summit in Madrid.
“The Five Star divisions should allow the government to reach the end of the parliamentary term in 2023. But we are now seeing a low intensity guerrilla war starting against the government before the general election next year, aimed at regaining consensus,” said Giorgia Serughetti, a political analyst at the Bicocca University in Milan.
“This will in particular involve the League and Five Star, and make Draghi’s government action more challenging, even if it is unlikely to trigger a snap election,” Serughetti said. She added that all the coalition parties are not ready to face an early vote now.
Investors didn’t show alarm about the stability of Draghi’s government. Italy’s 10-year yield premium over its German counterpart -- a closely-watched barometer of risk in the region -- rose two basis points to 195 basis points, after falling to a five-week low the previous day, after investors sought the safety of German debt as stocks slumped on recession fears.
Draghi secured on Wednesday final support from all parties in parliament for a non-binding resolution that commits the government to continue supporting Ukraine. In a bid to differentiate Five Star’s stance and to bank on divided public opinion, Conte has been opposing sending weapons to Ukraine, in conflict with the government’s stance.
The clash triggered the break-up with Di Maio, 35, who had backed Conte when the latter became prime minister in 2018.
New Group
Di Maio is now planning to set up a separate parliamentary group with at least 60 out of 227 Five Star lawmakers who back his attempt to shift the party from its populist roots to make it an establishment force, according to people familiar with the matter.
Salvini pressed for the government to forge ahead. “The government cannot stop because of the break-up of Five Star,” Salvini said Wednesday. “The League is urgently asking for new aid to deal with energy bills increase and fuel. Families and companies cannot wait.”
The ball is now in Conte’s court. Conte is considering leaving Draghi’s coalition and offering his support only on ad hoc basis, according to people familiar with the matter. Five Star said in a statement Tuesday they had no plan to quit the government.
“Conte could have been a wild card for Draghi, given his stance on Ukraine,” said Martina Carone, an analyst at political consultancy YouTrend. “But Di Maio’s strategy has been to downplay Conte’s role in parliament, and the size of lawmakers following him into a new party means that Conte is not a real threat for Draghi.”
(Updates with vote outcome in the eighth paragraph.)
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