Italy’s summer crisis

It wouldn’t be summer in Europe without a bubbling political crisis in Rome. After almost 18 months of (relative for Italy) stability under [View in browser]( [Bloomberg]( Follow Us [Get the newsletter]( It wouldn’t be summer in Europe without a bubbling political crisis in Rome. After almost 18 months of (relative for Italy) stability under the technocratic leadership of Mario Draghi, the wheels are starting to fall off. Draghi, the former European Central Bank chief, now has less than a week to either navigate difficult compromises with fractious factions in his government, or make good on his offer to step down. Key reading: - [Italy Risks Political Collapse as Draghi Urged to Rebuild Unity]( - [Here Is Why Italy Never Holds Snap Elections Over the Summer]( - [Italy’s Five Star to Boycott Senate Vote on Aid Package]( - [Italian Markets Slide as Mario Draghi’s Government on the Brink]( Neither outcome is likely good for Italy in the longer run, and investors are nervous about the outlook for the euro area’s third-largest economy, with the spread between Italy and Germany’s yield — a gauge of risk in the region — widening to 213 basis points. The latest drama was triggered after Draghi’s coalition partner, the Five Star Movement, boycotted a confidence vote in the senate as it criticized the level of government aid to families. Italy, like other countries in Europe, faces the challenge of higher energy costs, rising inflation in general and a heavier debt burden. Draghi could govern on without Five Star, and none of the major parties seem keen to tip this into an early election. But it would leave him weakened and more reliant on other groups in his coalition, something he is clearly not keen to do. Either way he will find it harder to enact his ambitious reform agenda. More broadly the problems in Italy come at an inopportune time for a region that needs to maintain cohesion on fiscal policy and on the response to Russia’s war in Ukraine. Draghi is due to address parliament early next week, where he may shed light on his next steps. But in the meantime the political maneuvering in Italy will rumble on. — [Chiara Albanese]( Draghi listens during a debate at the senate on Tuesday. Photographer: Alessia Pierdomenico/Bloomberg Click [here]( for this week’s most compelling political images and share this newsletter with others. They can sign up [here](. Global Headlines Hard talks | Group of 20 finance chiefs started meetings in Bali, Indonesia today with an eye toward [progress]( on food security and debt issues as tensions over Russia’s war in Ukraine impeded prospects for a more sweeping agreement. Discussions have been “very difficult but sometimes fruitful,” Indonesian Finance Minister Sri Mulyani Indrawati said. - US Treasury Secretary Janet Yellen wasted no time in [confronting]( Russian officials at the opening session, saying they are “adding to the horrific consequences of this war through their continued support of the Putin regime.” Shadow team | Donald Trump’s former aides are preparing a [shadow]( administration that can take charge if he returns to the White House as he hints he’s preparing to make another run for president. The nonprofit America First Policy Institute has assembled a team for him or any other potential Republican victor in the 2024 election to avoid the missteps of his first presidential transition. - President Joe Biden will leave the Middle East this week with no public announcements on [increasing]( oil supply, sources said. Biden travels on to Saudi Arabia later today. This year’s surge in fuel prices has governments around the world searching for ways to offer [relief]( and, in some places, suppress uprisings. Take a look above at how some governments are expanding subsidies, while some are slashing fuel taxes. Others are doing nothing at all. Stalled pledge | The European Union is falling behind on its high-profile [promises]( to deliver a substantial aid package to Ukraine. Nearly two months after European Commission President Ursula von der Leyen proposed sending $9 billion in emergency loans to Kyiv, the bloc has only managed to agree on an initial $1 billion tranche. Best of Bloomberg Opinion - [Has the Penny Dropped for UK Conservatives?: Therese Raphael]( - [China Is Giving Off Strong Lehman Brothers Vibes: Opinion Wrap]( - [Draghi Turmoil Is Bad News for Italy and Europe: Maria Tadeo]( Resurgent virus | China reported its [highest]( daily Covid-19 case tally in seven weeks as a new cluster emerged in the southern province of Guangxi, underscoring the difficulty of achieving the country’s Covid Zero strategy in the face of more infectious strains. The country announced 432 infections for yesterday, up from 292 a day earlier. - China’s economy grew at the [slowest]( pace since the country was first hit by the coronavirus two years ago, making its growth target for the year increasingly unattainable. Explainers you can use - [How China’s Property Developers Got Into Such a Mess]( - [UK Conservatives Upend Treasury Orthodoxy in Race for Leadership]( - [Europe Is Frying in Devastating Heat, Yet Is Burning More Coal]( Leadership change | Sri Lankan lawmakers will elect a [new president]( within seven days, the parliament speaker said, when he confirmed that Gotabaya Rajapaksa had officially resigned after fleeing to Singapore. Rajapaksa ceded to the months-long street protests calling for his ouster over fuel shortages, surging prices and financial mismanagement that’s left the South Asian nation facing its worst economic crisis. Demonstrators in Colombo cheer after hearing the news about Rajapaksa’s resignation. Photographer: Buddhika Weerasinghe/Bloomberg Bloomberg TV and Radio air Balance of Power with [David Westin]( weekdays from 12 to 1 p.m. ET, with a second hour on Bloomberg Radio from 1 to 2 p.m. ET. You can watch and listen on Bloomberg channels and online [here]( or check out prior episodes and guest clips [here](. News to Note - Saudi Arabia said it would open its [airspace]( to all airlines, including on routes to and from Israel, giving a small win to Biden during his visit today. - President Xi Jinping made his first trip to China’s [Xinjiang]( region since ordering the “strike hard” campaign in 2014 that targeted its Uyghur population and soured ties with the US over alleged human rights abuses. - US Senator Joe Manchin told his Democratic party leaders he won’t support new [spending]( on climate measures or tax increases, a colossal blow to Biden’s ambitious economic agenda. - The five remaining [contenders]( in the race to replace Boris Johnson as Conservative leader and UK prime minister hold their first TV debate today, as a three-day pause in voting allows MPs to plot potential deals. - Europe has [surpassed]( Asia to become the top consumer of American oil for the first time in six years. Pop quiz, readers (no cheating!). Which country, according to the US, is preparing to provide Russia with hundreds of drones including some capable of carrying weapons? Send your answers to balancepower@bloomberg.net. And finally ... Neom, Saudi Crown Prince Mohammed Bin Salman’s $500 billion urban [megaproject](, is supposed to have a ski resort, swim lanes for commuters and “smart” everything. Yet five years into its development, bringing the planned high-tech city-region the size of Belgium out of the realm of science fiction is proving a formidable challenge. The project has been plagued by setbacks, many stemming from the difficulty of implementing MBS’s grandiose, ever-changing ideas. A concept rendering of Wadi Hotel in a valley in Neom. Photographer: Iman Al-Dabbagh Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. You received this message because you are subscribed to Bloomberg's Balance of Power newsletter. 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