Draghi demands party unity as condition for staying on as Italian pm

By Giuseppe Fonte and Crispian Balmer

ROME (Reuters) -Italian Prime Minister Mario Draghi on Wednesday demanded unity among his coalition partners if they wanted him to stay in office, leaving his resignation threat hanging over parliament.

Draghi set out a series of issues facing Italy ranging from the war in Ukraine to social inequality and rising prices, and said political parties needed to get behind him if he was to steer the country to elections due in the first half of 2023.

"The only way, if we want to stay together, is to rebuild this pact, with courage, altruism and credibility," Draghi said in an uncompromising speech to the upper house, adding that this was what Italians wanted.

"Are the parties and you parliamentarians ready to rebuild this pact?" he added.

However, senators from the populist 5-Star Movement, which triggered the crisis last week after refusing to support the government in a confidence vote, did not applaud at the end of the speech -- nor did the rightist League party.

Draghi tendered his resignation last week after 5-Star walk out, but President Sergio Mattarella turned him down and told him to go back before parliament to see if he could revive the 18-month-old administration.

The Senate held a lengthy debate following Draghi's speech and was due to hold a de-facto vote on the future of the government by 7:30 p.m. (1730 GMT). The lower house was scheduled to discuss the political turmoil on Thursday.

The former European Central Bank chief has enough backing to remain in office without 5-Star, but he has so far rejected that option because his original mandate was to lead a national unity coalition with parties from across the political spectrum.

Complicating efforts to overcome the divisions, the League and its Forza Italia allies have said they do not want to share power with 5-Star anymore.

"We need a new government headed by you, prime minister," the League's leader in the Senate, Massimiliano Romeo, told the chamber, adding that the alternative would be early elections.

"There is more than one way out of this (crisis), but there must be a strong discontinuity. At this point the choice is yours prime minister," he said.

AUTUMN ELECTIONS

If Draghi decides the government can no longer continue, the president is likely to call elections in September or October. Italy has not had an autumn election since World War Two as that is the period normally reserved for drawing up the budget.

Draghi addressed core concerns of the 5-Star, saying it was important to tackle growing social inequality and pledging that the government would move towards introducing a minimum salary.

He also indicated that he would act on some of the League's policy priorities, such as cutting taxes and giving greater autonomy to the regions. But he also said the country needed to take potentially unpopular measures, such as enacting a law on boosting competition that the League has lobbied against.

"Italy does not need a veneer of trust, which vanishes in front of inconvenient measures. It needs a new pact of trust, sincere and concrete," he told coalition partners.

5-Star leaders said nothing in the hours that followed Draghi's speech and it was far from clear if they would rally behind his appeal. It was also not clear if Draghi was prepared to continue with a reduced majority should they leave.

"Draghi offered much more stick than carrot in this speech," said Francesco Galietti, head of the political risk consultancy Policy Sonar. "He indicated that he wanted to stay, but he also made clear what he doesn't like about the current situation."