Italian Prime Minister Giuseppe Conte handed in his resignation to the head of state on Tuesday, opening the way for formal consultations on how to overcome the political crisis, the president's office said.
President Sergio Mattarella will start consultations with party leaders on Wednesday afternoon, his office said in a statement, adding that Conte had been asked to stay on in a caretaker capacity as the talks continued.
Conte lost his absolute majority in the upper house Senate last week when a junior partner, the Italia Viva party headed by former premier Matteo Renzi, quit in a row over the government's handling of the coronavirus crisis and economic recession.
Conte survived a parliamentary vote of confidence last week but failed to secure a majority in the Senate, the upper house, leaving his government severely weakened.
His resignation comes ahead of a key vote on judicial reforms later this week, which commentators suggest the government was on course to lose.
"Conte's calculation is that by moving early, and thereby avoiding a humiliating defeat in the Senate later this week, he would increase his chances of securing a mandate from Mattarella to form a new government," noted Wolfango Piccoli of the Teneo consultancy.
He will likely then seek to widen support beyond his coalition, currently comprising mainly of the populist Five Star Movement (M5S) and the center-left Democratic Party (PD).
"However, it is currently unclear whether Conte can succeed in such an effort," Piccoli said.
He added that if he fails, the M5S and PD could "ditch Conte and look for another candidate" to head a new coalition government.
The ruling parties are keen to avoid snap elections, which opinion polls suggest would lead to victory for the center-right coalition comprising Silvio Berlusconi's Forza Italia and Matteo Salvini's far-right League party.
Shortly before the resignation announcement, key figures in both M5S and the PD offered their support to a new Conte government.
"We remain at Conte's side," said a statement from M5S's leaders in both parliamentary houses, Davide Crippa and Ettore Licheri.
"The transition to the so-called Conte ter (three) is now inevitable and is the only way out of this wicked crisis."
Conte, a once-obscure law professor, has been at the helm of two governments of different political persuasions since he took office following elections in 2018.
The first was a fractious coalition between M5S and Salvini's League, which ended when the latter pulled out in August 2019.
Conte went on to preside over another unlikely coalition between M5S and the PD, two former sworn enemies.
PD leader Nicola Zingaretti tweeted that he was "with Conte for a new government that is clearly pro-European and supported by a broad parliamentary base."
Italy was the first European country to face the full force of the pandemic early in 2020 and remains one of the continent's hardest-hit countries.
It has been allocated a large share of a 750 billion euro ($910 billion) European Union rescue fund, but Conte's 220 billion euro spending plan was a trigger for the current turmoil.
For weeks, Renzi had criticized Conte for his leadership style and his handling of the pandemic.
He warned that he and M5S risked squandering the EU billions on vote-winning handouts rather than addressing structural issues.
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