The Italian prime minister, Mario Draghi, has said he will resign after the Five Star Movement (M5S), a key party in his broad coalition, snubbed a crucial confidence vote, triggering a political crisis that could pave the way for early elections. The vote on a controversial cost of living bill passed in the Senate, but Draghi said: “The pact of trust underlying the government has failed. “In recent days there has been the utmost commitment on my part to continue on the common path, also trying to meet the needs that have been advanced to me by the political forces,” he said. “As is evident from today’s debate and vote in parliament, this effort was not enough. From my inauguration speech I have always said that this executive would only go forward if there was a clear prospect of being able to carry out the government programme on which the political forces had voted their confidence. This compactness was fundamental to face the challenges of these months. These conditions no longer exist.” The former European Central Bank chief met the president, Sergio Mattarella, after the vote and was expected to offer his resignation. However, Mattarella rejected Draghi’s resignation on Thursday night and asked him to address parliament to try to get a clearer picture of the political situation. Draghi will give a speech in parliament on Wednesday, but it is not yet clear if this will involve a vote of confidence. If he can’t solidly stitch together enough support to carry out his economic reforms, Mattarella could pull the plug on parliament, setting the stage for an early election as soon as late September. Currently, the parliament’s term is due to expire in spring 2023. M5S, led by the former prime minister Giuseppe Conte, boycotted the vote on a €26bn cost of living bill, arguing that the funds set aside to help households and businesses hit by inflation and rising energy costs were insufficient. The bill also included a provision allowing Rome authorities to build a huge incinerator for the Italian capital’s rubbish, a project M5S has always opposed. Conte has been threatening to pull M5S, which has lost half its support since emerging as the biggest party in Italy in the 2018 general elections, from Draghi’s broad coalition for weeks. “Today was the first episode, and it seems the saga will have its climax next week,” said Francesco Galietti, the founder of Policy Sonar, a consultancy in Rome. “Draghi managed to get the controversial bill passed, but the problem is that M5S abstained. So he has gone to Mattarella, probably to offer his resignation. In any case, there’ll probably be a confidence vote [on a new Draghi mandate] next week, and we need to see if M5S will support that.” M5S has struggled to revive its fortunes under Conte’s leadership. The party has lost dozens of parliamentarians, and its former leader Luigi Di Maio, the current foreign minister, split from the group last month, taking more with him. Analysts say the latest move was mostly owing to the turmoil within the ailing party rather than motivated by any meaningful policy differences with Draghi’s administration. Draghi was appointed to head a unity government in February 2021, with his main goal to lead Italy out of the coronavirus pandemic and revive its economy. A government collapse could prompt early elections, possibly in the autumn.