Italy's President Sergio Mattarella on Thursday refused to accept Prime Minister Mario Draghi's resignation, in a political crisis experts warned could send the eurozone's third largest economy to snap elections.

Mattarella "did not accept the resignation, and invited the prime minister to appear before parliament to make a statement," the presidential palace said, amid reports Draghi would address parliament next week to see if he has the necessary majority to stay on.

The crisis was precipitated by the refusal of the Five Star Movement to participate in a government confidence vote. 

Although the government won the vote, Draghi had insisted that the conditions necessary to carry on with the coalition government were "no longer there" and the "pact of trust that the government is based on has gone".

Formerly anti-establishment Five Star (M5S), headed by former premier Giuseppe Conte, has been haemorrhaging support in the polls and parliamentarians, hurt by policy U-turns and internal divisions.

The decision to sit out the vote -- which political experts say is a tactical attempt to win back grassroots support ahead of the scheduled 2023 general election -- could push Draghi's already fractured coalition to collapse.

It could even bring forward national elections to later this year.

Draghi had previously warned on multiple occasions he would not carry on as premier without Five Star support. 

- 'Last ditch compromise?' -

The vote was called on an aid package worth about 23 billion euros, designed to help combat rampant inflation. But it also included a provision to allow a garbage incinerator to be built in Rome -- something the Five Star has long opposed.

"Unless there is a last-ditch compromise, a formal government crisis looks inevitable," Lorenzo Codogno, a professor at the London School of Economics, said in a note.

The far-right has seized on the tensions, with both the anti-immigrant League -- part of Draghi's coalition -- and the opposition Brothers of Italy party saying new elections should be called.

Neither is likely to be keen to support a caretaker government, or a Draghi government without the Five Star in it, Codogno said. 

Analysts suggested President Mattarella could ask the former European Central Bank chief to seek support from parties in a new vote early next week.

Such support could include Five Star, which has little interest in early elections that could see it perform poorly.

The Milan stock market closed down three percent after the political turbulence. 

- Ball in Draghi's court -

Draghi was appointed prime minister in February 2021 by Mattarella and charged with carrying out key reforms required under the EU's largest tranche of post-pandemic recovery funds -- a package worth approximately 200 billion euros for Italy.

The government has since found itself embroiled in the war in Ukraine, taking a strong, pro-EU line, while battling soaring inflation at home. 

Draghi's support of Ukraine, which includes sending weapons and backing EU sanctions, won a parliamentary confidence vote in June despite criticism from Conte that the policy risked fuelling an arms race.

Five Star won legislative elections in 2018 with an unprecedented third of the vote but is now facing an uncertain future with major internal fractures and is now polling at 11 percent.

Last month, the party -- which had represented the largest in parliament -- split, with Foreign Minister Luigi Di Maio starting a breakaway group. 

Codogno told AFP he did not believe that Conte was seeking to bring down the government. 

But, he noted, his party "wants to make headlines and make gains in the polls again by running opposition as if it were not in government". 

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