Former European Central Bank chief Mario Draghi started talks on Thursday on forming a new Italian government as the largest party in parliament, the Five Star Movement, softened its initial hostility to his appointment.

On Wednesday, President Sergio Mattarella asked Draghi to form a non-political government to steer Italy through the coronavirus pandemic after last-ditch negotiations among political parties failed. 

Outgoing Prime Minister Giuseppe Conte, in his first public comments on the political tumult on Thursday, wished Draghi well and said he hoped the next government would have a political nature and not comprise only unaffiliated technocrats.

The words of Conte –  himself not a member of any party but close to Five Star Movement –  were seen as a signal that his cabinet allies should consider working with Draghi, one of the most respected institutional figures in both Italy and Europe.

The Five Star Movement, given its large presence in parliament, could play a crucial role in the coming days. Traditionally opposed to technocrat governments, it was instinctively hostile to Draghi when he was first given the nod.

Center-left Democratic Party (PD) leader Nicola Zingaretti also said on Thursday that Draghi could count on his party's support, adding that he saw an 80-90 percent chance that he would manage to form a government.

The last time a technocrat took charge in Italy was in 2011, when another economist, Mario Monti, was entrusted with helping Italy out of a debt crisis. Parliamentarians soon turned on him when they deemed that his economic medicine was too pungent.

Matteo Renzi, the head of the small Italia Viva party which triggered Conte's downfall by withdrawing from the cabinet, has offered Draghi unconditional support and said on Thursday a new government could take office next week.

Eurozone's savior

With Italy mired in a health and economic crisis, Draghi's mandate to form a new government after the previous one collapsed in acrimony cheered investors. Italy's borrowing costs dropped on Thursday, with the gap between Italian and German bond yields below 100 basis points for the first time since January.

The former bank chief is widely credited with pulling the Eurozone back from the brink of collapse in 2012, pledging to do "whatever it takes" to save the single European currency.

He largely vanished from the public eye after his ECB term ended in October 2019, but his name emerged as a potential premier in recent weeks amid the political turmoil, combined with Italy's health and economic emergencies.

The first European country to be badly hit by the coronavirus, Italy has seen more than 90,000 deaths since its outbreak almost a year ago – the sixth-highest toll in the world.

Lockdowns aimed at curbing the contagion have devastated the economy and data released on Tuesday showed that Italy's gross domestic product (GDP) shrank by 8.8 percent in 2020 – its steepest annual drop since World War II.

(With input from agencies)