Mario Draghi has resigned as Italian prime minister, throwing the country into months of turmoil and weakening Europe’s leadership at a critical time.

President Sergio Mattarella’s office announced the news on Thursday morning after the two men met at the presidential palace. Draghi’s decision to quit came after he failed to win the support of his coalition partners in a vote of confidence in parliament. Early elections are now due to be held on September 25.

In emotional scenes in parliament on Thursday morning, Draghi told the Lower House he was going to hand in his resignation. He was met with extended applause from some in the chamber, who rose to their feet. “Thanks,” he said in response. “Even central bankers have a heart.”

The departure of 74 year-old Draghi, a former president of the European Central Bank, deprives Italy of an authoritative leader on the threshold of an unprecedented energy and cost-of-living crisis, and with a war on Europe’s doorstep.

It marks the culmination of weeks of tensions within Italy’s fractious coalition, which Draghi had tried to run as a government of national unity. After losing the support of the populist 5Star Movement last week, on Wednesday the prime minister lost the backing of the right-wing parties in his alliance – Silvio Berlusconi’s Forza Italia and Matteo Salvini’s League.

He is expected to stay on in a caretaker role until a new government is formed after the elections in September. The right-wing parties are expected to win that vote and take power as part of a coalition with the national-conservative opposition, Brothers of Italy. But it could take months after the results are known before the new administration is assembled.

The favorite to take over as prime minister will be Georgia Meloni, leader of the Brothers of Italy party, who welcomed the prospect of new elections. “With Draghi’s resignation this legislature is over for Brothers of Italy,” she wrote on Twitter. “We will fight to give back to the Italian people what citizens of all other democracies have: the freedom to choose who represents them.”

Draghi’s exit robs the EU of one of its most experienced leaders and a giant of European economics at a hugely difficult time for the bloc.

Markets reacted badly to the news, with Italian stocks falling and bond yields – a measure of risk in lending to the government – rising. The collapse of Draghi’s coalition will also complicate the ECB’s decision making on Thursday, when the bank is expected to announce a rate rise and a new “tool” designed to stabilize eurozone government debt.

With a war and an energy crisis adding to fears of a European recession, the absence of Draghi’s expertise from the EU’s top table will also be a blow to the bloc’s leadership, just when it is most needed.

President Mattarella had asked Draghi to verify his majority in Parliament after tensions within the coalition culminated in the populist 5Star Movement boycotting a confidence vote last week.

Draghi technically won a new confidence vote in the Senate on Wednesday, but three of the parties in his grand coalition abstained or were absent for the vote, rendering his victory meaningless.

Many politicians in Italy and outside had wanted Draghi to stay.

Families’ minister Elena Bonetti said the applause that he received in the chamber was “emotional” and “was evidence of the institutions that believed wholeheartedly in his government.” She called the actions of the parties that had abandoned Draghi “unexpected and unjustified” – particularly from the moderate right, which “allowed populism and nationalism to triumph over the interests of the Italian people.”

Foreign Minister Luigi Di Maio wrote on Twitter that the crisis was “a black page” in Italy’s national narrative, accusing his former coalition partners of “playing games with the future of the Italian people. The effects of this tragic choice will remain in our history.”