Italy's President Sergio Mattarella dissolved parliament Thursday, triggering early elections which could bring the hard right to power after the country's warring parties toppled reformer Prime Minister Mario Draghi.

Elections will take place on September 25, a government source told AFP, while the internationally-respected Draghi will stay on as head of government until then.

Dissolving parliament was always a last resort, Mattarella said, but in this case a lack of consensus among the parties that had made up Draghi's national unity government made it "inevitable".

Italy was facing major challenges, however, that could not be put on the backburner while the parties campaigned, he said.

There could be no "pauses in the essential interventions to combat the effects of the economic and social crisis and in particular the rise in inflation".

'No more excuses'

Based on current polls, a rightist alliance led by Giorgia Meloni's post-fascist Brothers of Italy party would comfortably win a snap vote.

"No more excuses", tweeted Meloni, 45, who vociferously led the opposition throughout Draghi's term and has long called for fresh elections.

Draghi, a former European Central Bank chief, was parachuted into the premiership in 2021 as Italy wrestled with a pandemic and ailing economy.

On Wednesday, he attempted to save the government, urging his squabbling coalition to put aside their grievances for the sake of the country.

But three parties - Silvio Berlusconi's centre-right Forza Italia, Matteo Salvini's anti-immigrant League and the populist Five Star Movement - said it was no longer possible for them to work together.

French President Emmanuel Macron, deprived of a major ally in Europe, hailed Draghi as a great Italian statesman and saluted his "unfailing commitment to reforming his country". 

Ukraine's leader Volodymyr Zelensky thanked Draghi, who took an uncompromising stance against Russia and played a key role within the EU in backing Kyiv's bid for membership in the bloc, for his "unwavering support".

'Enough craziness'

The stunned centre-left Democratic Party (PD), which had supported Draghi, said its hopes were now pinned on Italians being "wiser than their MPs".

Italy's latest crisis was sparked when Five Star snubbed a key vote last week, despite warnings from Draghi that it would fatally undermine the coalition.

"Enough with Five Star craziness and PD power plays: Italians now get to choose", anti-immigrant Salvini tweeted Thursday.

Though Five Star triggered the crisis, it was Salvini who pushed Draghi under the metaphorical bus, political commentators said.

The former interior minister, who has been losing voters to Meloni, "saw an opportunity to regain his primacy, in the centre-right and within the League", editorialist Marco Damilano wrote in the Domani daily.

Draghi's downfall comes despite recent polls suggesting most Italians wanted him to stay at the helm until the scheduled general election next May.

Anxious investors were watching closely as the coalition imploded.

The European Central Bank on Thursday unveiled a tool to correct stress in bond markets for indebted eurozone members, such as Italy.

Milan's stock market dropped 2% on opening Thursday and the spread - the difference between 10-year Italian and German treasury bonds - widened to a high as 241 basis points after Draghi's resignation.

Period of uncertainty

Supporters of Draghi had warned 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.

The Brothers of Italy party, which has neo-fascist roots, is leading in the polls, with 23.9% of voter intentions, according to a SWG survey held three days before Draghi's resignation.

To win a majority it would need the support of the League (polling at 14%) and Forza Italia (7.4%).

The PD is just behind Brothers of Italy, with 22.1%, but may be forced to ally with the troubled Five Star (polling at 11.2%), if it is to have a chance at beating the right.

Should a Brothers of Italy-led coalition win, it "would offer a much more disruptive scenario for Italy and the EU", wrote Luigi Scazzieri, senior research fellow at the Centre for European Reform.

Research consultancy Capital Economics said, however, there were "powerful fiscal and monetary incentives" for the next government to implement the reforms demanded by the European Union, or risk missing out on post-pandemic recovery funds worth billions of euros.

Brothers of Italy has repeatedly blamed the EU for Italy's troubles.

But Meloni's support for a "strong and common EU response" to Russian President Vladimir Putin's war in Ukraine, "has already distanced herself from some other right-wingers in Italy and Europe," said Holger Schmieding, chief economist at Berenberg Bank.

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