President Mattarella’s move to give Draghi a mandate to put together a high-profile administration comes after talks fail to salvage Prime Minister Giuseppe Conte’s shattered coalition.

Italian President Sergio Mattarella (left) receives former European Central Bank President Mario Draghi (right) at the Presidential Palace Quirinale, Roma, on February 3, 2021.
Italian President Sergio Mattarella (left) receives former European Central Bank President Mario Draghi (right) at the Presidential Palace Quirinale, Roma, on February 3, 2021. (AA)

Italian President Sergio Mattarella has asked former European Central Bank chief Mario Draghi to form a government to tackle the twin coronavirus and economic crises battering the country.

Draghi must now try and muster support in the fractured parliament, with some political parties reluctant to back an administration led by a technocrat.

Mattarella's move came after talks aimed at salvaging Prime Minister Giuseppe Conte's shattered coalition collapsed leaving him with two options – early elections or else a technocrat government to overcome the many challenges facing Italy.

The president said national elections during the coronavirus pandemic were unwise, and warned that a new administration had to take office immediately or the country risked missing out on more than $243 billion (200 billion euros) from a European Union fund designed to help overcome the economic slump.

READ MORE: Italy parties fail to revive coalition, president hints at technocrat govt

However, there was no guarantee that the highly respected Draghi would be able to muster sufficient support, with the largest party in parliament, the anti-establishment 5-Star Movement, immediately ruling out its backing.

Draghi is widely credited with pulling the euro zone back from the brink of collapse in 2012, pledging to do “whatever it takes” to save the single European currency.

He has largely vanished from the public eye since his ECB term ended in October 2019, but his name emerged as a potential premier in recent weeks as political turmoil combined with the health and economic emergencies to form a perfect storm.

READ MORE: Italy's PM Conte to resign on Tuesday, hopes to form new government

Coronavirus crisis devastated Italian economy

The first European country to be hit by the coronavirus, Italy has seen more than 89,000 deaths since its outbreak almost a year ago – the sixth-highest toll in the world.

Lockdowns aimed at curbing the contagion have devastated the economy and data released on Tuesday showed that Italy’s gross domestic product shrank by 8.8% in 2020 – its steepest annual drop since World War Two.

Italy’s 10-year bond yield fell sharply in early trade on Wednesday touching the lowest level in almost two weeks. The closely watched gap between Italian and German 10-year bond yields narrowed to 104 bps from 113 bps late on Tuesday.

Looking to parliament

The first challenge facing Draghi will be parliament.

The 5-Star, which has formed the backbone of Italy’s last two coalition governments, has repeatedly railed against the concept of technocrat governments and would likely face a grassroots revolt if it backed the veteran central banker.

“The 5-Star would only have supported a government led by Giuseppe Conte,” said Riccardo Fraccaro, a party bigwig and government undersecretary.

If the 5-Star remains on the sidelines, all eyes will be on the next two largest parties – the centre-left Democratic Party (PD) and far-right League – who are sworn political enemies but might have to vote together to give Draghi a chance.

Asked whether his eurosceptic party would back the 73-year-old economist, League leader Matteo Salvini said it would depend on his plans. “He has to tell us what he intends to do,” Salvini told Italian daily Corriere della Sera.

READ MORE: Italian PM Conte wins confidence vote but loses overall majority

Source: Reuters