Italian President Sergio Mattarella on Thursday rejected the resignation of Prime Minister Mario Draghi and asked him to address Parliament to get a clear picture of the political situation.

Draghi had announced his plan to resign on Thursday after the Five Star Movement, a coalition party, declined to back him in a confidence vote over his plan to combat soaring prices.

"The national unity coalition that backed this government no longer exists," said Draghi, a former European Central Bank president who has been prime minister of a broad coalition since February 2021.

It was not clear how Draghi would respond to the intervention of Mattarella, the supreme arbiter in Italian politics.

Draghi, 74, went to the Quirinale Palace in Rome to meet President Sergio Mattarella and hand in his resignation but Mattarella urged him to rethink.

Draghi is expected to appear in Parliament next Wednesday and is likely to proceed before then with a planned trip to Algeria, an important gas supplier, on Monday and Tuesday, political sources said.

Draghi, Italy's sixth prime minister in the past decade, has won plaudits for helping to steer Italy through the COVID-19 crisis.

The confidence vote had become a focal point for tensions within Draghi's government. The Five Star party had wanted Draghi to do more to help families cope with rising inflation even if it meant a steeper hike in government borrowing.

Draghi had said he would not want to lead a government without Five Star, which emerged as the largest party in the previous election in 2018 but has since suffered defections and a loss of public support.

Mattarella, 81, can try to persuade Draghi to form another government, find a new caretaker leader to take Italy to the election due next year, or call an early election.

Italy has not had an autumn election since World War II as that is normally when the budget is drawn up and approved by parliament.

The turmoil comes at a challenging time for Italy, the third largest economy in the euro zone, where borrowing costs have risen sharply as the ECB starts tightening its monetary policy.

The ECB is working on a new tool to contain divergence between German borrowing costs and those of highly indebted member states such as Italy.

Draghi had been seen as providing reassurance that Italy would respect any conditions attached to the new mechanism but his departure would create fresh uncertainty.

(With input from Reuters)