Portugal Colonial - Italy's Draghi urged to fix crisis as resignation refused

Draghi had earlier vowed to resign after a party in his coalition government -- the Five Star Movement -- sat out a confidence vote, sending tremors through the eurozone's third largest economy.

Draghi said the "pact of trust" on which the government was based had been broken, and the conditions to carry on were "no longer there".

He said he had made "every effort" to "meet the demands that have been put to me", but the vote showed "this effort was not enough".

President Sergio Mattarella, a figurehead who takes on a key role in moments of political crisis, asked Draghi not to throw in the towel but instead "assess" the situation in parliament.

He was expected to do address both the lower and upper houses on Wednesday.

"We now have five days to make sure parliament votes its confidence in the Draghi government," Enrico Letta, head of the centre-left Democratic Party (PD), said on Twitter.

The crisis comes as Italy battles raging inflation and races to push through key reforms required by the European Union in exchange for post-pandemic funds.

- New elections? -

The Five Star Movement (M5S), headed by former premier Giuseppe Conte, has been haemorrhaging parliamentarians and support in the polls over policy U-turns and internal divisions.

It sat out Thursday's confidence vote in a move described by experts as a tactical attempt to win back grassroots backing ahead of the scheduled 2023 general election.

The government survived the vote, but Draghi had previously warned on multiple occasions he would not carry on as premier without Five Star support.

The confidence vote was called on an aid package worth about 23 billion euros ($23 billion), designed to help combat rampant inflation.

But it also included a provision to allow a garbage incinerator to be built in Rome -- something the Five Star has long opposed.

The Five Star said it could not stomach voting for the incinerator, but still supported Draghi.

The crisis could still end with Italians heading to the ballot boxes later this year.

The far-right has seized on the tensions, with both the anti-immigrant League -- part of Draghi's coalition -- and the opposition Brothers of Italy party saying new elections should be called.

But Draghi could equally find himself back at the head of the exact same coalition, as Five Star has little interest in early elections that could see it perform poorly.

The Milan stock market closed down three percent after the political turbulence.

- 'Running opposition' -

Draghi was appointed prime minister in February 2021 by Mattarella and charged with carrying out the reforms required to secure the EU's largest tranche of post-pandemic recovery funds -- a package worth approximately 200 billion euros for Italy.

The government has since found itself embroiled in the war in Ukraine, taking a strong pro-EU line while struggling with a cost-of-living crisis at home.

Draghi's support of Ukraine, which includes sending weapons and backing EU sanctions, won a parliamentary confidence vote in June despite criticism from Conte that the policy risked fuelling an arms race.

Five Star won legislative elections in 2018 with an unprecedented third of the vote but is now facing an uncertain future with major internal fractures and is now polling at 11 percent.

Last month, the party -- which had represented the largest in parliament -- split, with Foreign Minister Luigi Di Maio starting a breakaway group.

Lorenzo Codogno, a professor at the London School of Economics, told AFP the Five Star had sat out the vote because it "wants to make headlines and make gains in the polls again by running opposition as if it were not in government".

H.Portela--PC