Sergio Mattarella, Italy’s head of state, will meet Draghi on Wednesday after two rounds of talks failed to seal an agreement among parties on a new premiership for the outgoing Giuseppe Conte, who had hoped to make a comeback. Instead, the president is poised to formally ask Draghi to try to form a government

Italy’s bonds rallied, sending the 10-year yield to a two-week low at 0.58% and narrowing the premium over its German counterpart seven basis points to 107, the lowest since Jan. 12 at 8:15 a.m. in Rome. Futures on the benchmark FTSE MIB index jumped 2.7%.

Mattarella, whose task it is to pick a premier-designate, had earlier appealed to political parties to give the strongest support possible to a high-profile figure, warning that Italy could not afford early elections during a pandemic and invoking the need to agree on the European Union’s recovery fund.

The appointment of a crisis-fighter of Draghi’s caliber will be welcomed by markets and could put an end to the political intrigue that threatened to make Italy ungovernable.

But Draghi would need to gain a majority in both houses of parliament, and this may not prove easy as some parties have said they won’t back him.

The Five Star Movement, the biggest force in parliament, swiftly refused to support a Draghi-led government. Vito Crimi, political leader of the group born as an anti-establishment force, said past administrations led by technocrats had created “extremely negative consequences for Italian citizens.”

The fractious Five Star could, however, ultimately be divided over the issue, with several lawmakers possibly choosing to back Draghi.

If he becomes the next premier, Draghi’s job will be to find an enduring path to recovery for an economy that has barely grown in decades, giving it the longer-term scope to reduce its massive debt burden. He will also need to deploy all his diplomacy to navigate a complex political landscape rife with infighting.

Super Mario

A trained economist, Draghi is credited with shoring up the euro at the height of the debt crisis in 2012 with his “Whatever it takes” speech. He also started the quantitative-easing program of sovereign debt purchases which has subsequently been expanded to become a key tool in supporting the European economy during the pandemic.

Draghi ended his eight years as the helm of the ECB in 2019, and ever since he’s kept pundits guessing on whether he’d consider a role in Italian politics.

The euro gained versus the dollar following the announcement. It traded at 1.2039 at 7:19 a.m. in Milan, reversing earlier losses.

The latest development appears to spell the end for Conte’s political career — at least for now. The outgoing premier, who has no political party of his own, may decide to set up a new grouping, given his strong poll numbers.

Conte’s ruling coalition was brought down by Matteo Renzi, himself a former premier. The two men dislike each other and this outcome represents a victory for Renzi.

In public, Renzi had kept Italy guessing on whether he would agree to Conte’s return, saying only that he wouldn’t veto anyone as the next premier. But in private, he floated Draghi’s name, according to officials who asked not to be named while discussing confidential deliberations.

–With assistance from Alessandro Speciale and James Hirai.