Italian Prime Minister Giuseppe Conte announced his intention to resign on Tuesday, as a political crisis rumbles on in Rome that could eventually lead to new elections.
Conte has been under pressure since one of the country's deputy prime ministers — Matteo Salvini who leads the right-wing Lega party — called for a snap election earlier this month. He declared the coalition government unworkable and called for a no-confidence vote in Conte.
Conte launched a stinging tirade at Salvini in the Italian Senate Tuesday before saying he would go to the president to formally resign as leader. He said Salvini's actions had been grave and would have consequences for the country.
Conte said that Salvini had violated the coalition's commitment and he had acted with political opportunism, according to a Reuters translation.
"(Salvini) has shown that he is following his own interests and those of his party," Conte told a packed Senate, according to the news agency. "His decisions pose serious risks for this country."
Conte — a law professor who was appointed by both parties who form a coalition in Rome but is not affiliated with either — added that the political crisis probably meant the end of this current government. Italian bond yields slipped on Tuesday as Conte spoke and the Italian banking index was down 2.1% as he announced his intention to resign.
Italy — the third largest euro zone economy — has been governed by a two-party coalition since elections in March 2018 yielded no outright winner in Rome. The Lega party favors tax cuts and aims to stop illegal immigration while the Five Star Movement (M5S) promotes initiatives that would extend benefits for citizens.
This coalition has been on a rocky road since it first came to power. Some of the tension has been caused by government appointments, the country's relationship with the European Union, and, more recently, a high-speed rail link.
Salvini's Lega is leading current opinion polls with a rating of around 37%. Lega came to power as the junior coalition partner, but Salvini's tough rhetoric has helped to boost the party's popularity in a country where immigration is a key issue. M5S has, meanwhile, seen its support drop and is polling third at 18%.
The country's future is now in the hands of the Italian President, Sergio Mattarella. He will first receive Conte who will formally resign and then it will be up to him to hold consultations to see whether any parties can form a majority.
If not, he will call a fresh election and decide whether a technocratic and caretaker government should be put in place. Meanwhile, Italy's opposition Democratic Party (PD) has reportedly discussed forming a coalition with M5S.
The 2020 budget
The instability has caused uncertainty in a country that has been plagued by political turmoil. The Italian government, just like other euro zone nations, has to put together its spending plans for the new year by mid-October. The prospect of an early election has led investors to contemplate what sort of economic targets Italy will present to officials in Brussels.
The country has one the highest public debt piles globally, above 130% of its debt-to-GDP (gross domestic product) and any increase in spending could increase public debt even further — an issue which has strained relationships between Brussels and Rome.
On Tuesday, Conte claimed that Salvini's actions would mean it's unlikely the budget would be passed on time. He also said that the country risks financial instability and spoke of a possible VAT increase.