Italy Is Set to Face Crisis If PM Draghi Quits

Draghi

The euro area and Italy are heading for trouble that can unsettle markets for months if Mario Draghi does not reconsider resigning.

The former European Central Bank head is awaited to specify early next week if he is ready to lead a recalcitrant coalition government or whether he would permanently leave the office.

Italy hangs on this decision as it consigns the country to several months of political instability during a delicate period when lawmakers ty are working on a budget for the following year. His resignation will also mean that Italy risked needed reforms to guarantee that it recovers its 200 billion euros from the European Union. That would pose a disaster for Rome, which like the rest of Europe, is battling an energy crisis and surging inflation.

Italy has been withstanding the impact of the Russia/Ukraine war and energy problem and is expected to expand slightly in the second quarter. However, Bank of Italy Governor Ignazio Visco warned that the country would fall into recession if Moscow halted deliveries, and with all of Draghi’s contribution, Italy remains dependent on Russia.

Italian bonds fell for a third day Friday, and its stock market has fallen about 5.6% this week. The country’s worst-performing primary index in Europe this year was down by 26%.

The ongoing political turmoil was heightened this week after Five Star spurned a confidence vote in the senate, leading Draghi to offer his resignation, which President Mattarella rejected.

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