San Francisco Frontiers - Italy's Draghi lays down conditions for government survival

Draghi said now was not the time for political uncertainty within the eurozone's third largest economy, amid a myriad of domestic and geopolitical challenges, from a struggling economy to the Ukraine war.

"We now need staunch support for the government's programme," Draghi told the Senate.

"The only way forward if we want to stay together is to rebuild afresh this (government) pact with courage, selflessness, credibility," he said.

"Are you ready? ... You don't owe this answer to me, but to all Italians".

The stern speech by a usually softly-spoken Draghi suggested that the former leader of the European Central Bank was prepared to stay -- but on one condition: if the wildly disparate parties pledge anew to a common agenda.

The crisis was sparked by the refusal by the Five Star Movement, a coalition member, to opt out of a confidence vote last week.

Draghi offered to resign immediately afterwards, but was persuaded by Italy's president to reach out to parties first.

- 'Carrot and stick' -

Polls suggest most Italians want Draghi, 74, to stay at the helm until the scheduled general election in May next year. His departure could force the president to dissolve parliament and call elections for September or October.

Parliamentarians will now debate for over five hours, setting out their positions. Draghi will then respond, before a vote later Wednesday.

"Draghi did not compromise. He was very tough," Francesco Galietti, Policy Sonar analyst, told AFP.

"The entire speech was stick and carrot – though much more stick than carrot".

There is much at stake: a government collapse could worsen social ills in a period of rampant inflation, delay the budget, threaten EU post-pandemic recovery funds and send jittery markets into a tailspin.

Draghi noted Wednesday that as an unelected leader he needs the broadest consensus possible to tackle Italy's most pressing issues: from a cost of living crisis and recession worries, to the rollout of key reforms and the Ukraine war.

For a long time, he said, his coalition was able "to put aside divisions and come together... for rapid and effective action, for the good of all citizens".

But "the desire to move forward together gradually waned, and with it the ability to act effectively, with 'timeliness', in the interests of the country".

- 'Last-ditch compromise?' -

Parties on the centre-left immediately said they would support Draghi, but a question mark remains over right-leaning Forza Italia and the League, which have ruled out staying in government with Five Star.

"We are in the middle of an Italian-style political crisis, so predictions change utterly from one second to the next," Giovanni Orsina, head of the Luiss School of Government in Rome, told AFP.

Five Star head Giuseppe Conte has demanded Draghi adopt the Movement's priorities, from a minimum wage to tax credits on energy-efficient home upgrades -- something he is unlikely to do.

The populist party may split before the vote, with Forza Italia and the League potentially agreeing to work with the breakaway element.

Once the largest party in parliament, the Five Star Movement has already seen scores of defections as it hews to its radical, anti-establishment side in a bid to reverse plummeting support in the polls.

At least 15 more of its MPs were set to quit should Five Star vote against Draghi, news agency AGI said.

"A last-ditch compromise cannot be entirely ruled out," Lorenzo Codogno, a former head economist at the Italian treasury, said in a note.

- 'Greater political uncertainty' -

But Fitch ratings agency warned the political crisis "heralds greater political uncertainty even if early elections are avoided", with "structural reform and fiscal consolidation likely to become more challenging".

Two-thirds of Italians believe Draghi should stay, according to a Euromedia poll published Tuesday. Nearly 2,000 mayors have signed a petition calling for him to remain PM.

Hundreds of people took part in pro-Draghi sit-ins on Monday, while on Tuesday Spanish President Pedro Sanchez penned an opinion piece in Politico titled "Europe needs leaders like Mario Draghi".

The tool is meant for countries like Italy -- but as Enrico Letta, head of the centre-left Democratic Party (PD) said Tuesday, "if we don't pull ourselves together, it will be harder to ask others to save us".

X.White--SFF