Italy's ruling coalition collapsed on Wednesday after former Prime Minister Matteo Renzi withdrew support over the country's economic recovery plans.
Renzi announced in a press conference on Wednesday evening that his Italia Viva party was resigning from government. The small centrist party had two ministers.
It also means the ruling coalition no longer has a majority in parliament.
His announcement plunged the country, Europe's most heavily impacted by the pandemic, into a new political crisis.
Why Renzi matters
Renzi launched his Italia Viva party in September 2019 after resigning from the centre-left Democratic Party and being instrumental in the formation of Prime Minister Guiseppe Conte's second coalition government following the departure of the populist right-wing League party.
Italia Viva has little public support — it currently polls at around three per cent. But it is a junior coalition partner thanks to its 30 lawmakers in the lower house and 18 in the upper house.
The coalition comprised the left-wing populist Five Star Movement (MS5), the centre-left Democratic Party, Italia Viva and the left-leaning parliamentary group Free and Equal.
What is the infighting about?
Renzi and Conte disagree on how to use EU funds to kickstart the economy. Italy is to receive more than a quarter of the bloc's €750 billion stimulus package which will be handed out in both grants and low-interest loans.
Among the many issues is Renzi's belief that the country should also make use of the European Stability Mechanism (ESM) which offers cheap loans to finance member states' healthcare expenditures. Conte and MS5, however, have dismissed the idea arguing it would add to the country's debt pile.
Italy has the second-highest government%20) debt in the EU, after Greece.
The spending plan championed by Conte was approved by lawmakers during the night of Tuesday and Wednesday. Italia Viva lawmakers abstained.
According to Luigi Scazzieri, a research fellow at the Centre for European Reform (CER) think tank, wrangling over money is not the only reason behind the coalition woes.
"The real reason is that Renzi has been sidelined in the past years, his party is polling poorly and wants to gain greater prominence and strengthen his electoral appeal," he told Euronews.
What happens next?
Conte is now faced with two scenarios.
The first one would be to call a vote of confidence. Losing it would mean his government would be a caretaker government only and would have little policy-making power.
But there might be little appetite for that.
"I don't think holding new elections in the middle of the pandemic is likely. Renzi's party would be trounced in elections so it's possible that we will actually end up with very small changes. Renzi could continue to support Conte as Prime Minister if his party is given a few extra ministers in the government," Scazzieri said.
Conte could also resign in the hope of securing his third coalition government without Renzi. This would require "an ad-hoc group of so-called 'responsible' MPs from smaller political forces replacing Renzi's MPs, or even with Berlusconi's party offering to support Conte," Scazzieri said.