181124 Mario Draghi 2
Mario Draghi Image Credit: Reuters

Rome: Italy is set to hold early elections on September 25, according to people familiar with the matter, a ballot that could lead to the victory of a center-right coalition.

President Sergio Mattarella announced on Thursday that he dissolved parliament after Mario Draghi resigned as prime minister earlier in the day. According to polls, a bloc led by Giorgia Meloni's Brothers of Italy is currently in the lead.

The vote will be the first held in the fall in the country's history, as it's the period when parliament is usually preparing the annual budget. A weakened Draghi will remain caretaker premier until a new government takes over.

Spooking markets, the euro zone's third-biggest economy faces months of political uncertainty as the area faces record inflation, slowing growth and energy shortages following Russia's invasion of Ukraine putting investors on edge.

Lawmakers - now without the discipline imposed by ex-central banker Draghi - will need to agree on reforms in order to unlock 200 billion euros ($205 billion) in European Union aid.

In a short speech after he dissolved parliament, Mattarella urged parties to work together with the outgoing government to address Italy's multiple challenges, from inflation to the energy crisis. "The time we live in does not allow us to pause in the crucial government action," Mattarella said. "We need to contain the impact of Russia's war in Ukraine."

Campaign Rush

With a short time frame ahead, parties will be rushed to prepare their campaigns to win over voters, who will be away on holiday for part of the summer. The election follows Draghi's decision to bow out after losing support from three of his key allies during a confidence vote Wednesday.

New elections won't mean Italy will have a new government in place anytime soon.

While the center-right coalition is expected to win the most seats, negotiations inside the alliance which includes Matteo Salvini's League, Giorgia Meloni's Brothers of Italy and Silvio Berlusconi's Forza Italia could take weeks to be resolved.

Brothers of Italy and the center-left Democratic Party are head-to-head in the first poll conducted after Draghi's resignation. But Brothers of Italy emerges as the main party in the center-right coalition, which would make Meloni the leader with the most say on a new government, according to the poll conducted by Lab210.

The League and Forza Italia are credited with about 17% and 6% of the vote respectively, according to the survey.

The election won't necessarily lead to a victory for the center-right, Democrat leader Enrico Letta told Bloomberg TV, as voters may choose to punish politicians who turned their backs on Draghi. The campaign "will lead voters to understand who was responsible and who wasn't," said Letta, a former premier.