Italy could be forced to hold new elections after Giuseppe Conte gave up his bid to form a government following the collapse of talks with the president over including a eurosceptic economy minister in his cabinet
"I have given up my mandate to form the government of change, " said Conte to reporters after leaving failed talks with President Sergio Mattarella.
Conte, 53, a lawyer and political novice, was named as prime minister Wednesday, but he still had to present a list of ministers that the head of state agreed to before his mandate could become fully effective and his government could seek approval in parliament.
Just minutes before Conte was due to present Mattarella with his list of ministers, a source in the would-be governing coalition said no deal had been reached on the pivotal economy ministry post.
After the meeting, Mattarella said he refused to approve Conte's candidate to the Economy Ministry, 81-year-old economist Paolo Savona, since his anti-euro stance would have "alarmed markets and investors, Italians and foreigners."
Mattarella told reporters, "Every day, the [bond] spread goes up, it raises our debt" costs.
Following the collapsed talks, Mattarella has summoned Carlo Cottarelli, former director of the International Monetary Fund's fiscal affairs department, for talks on Monday, with a temporary technical government now looking inevitable as Italy faces the strong possibility of new elections in the autumn.
Cottarelli, 64, worked at the International Monetary Fund from 2008 to 2013 and became known as "Mr Scissors" for making cuts to public spending in Italy.
5-Star leader Luigi Di Maio said Mattarella's rejection of Savona was "unacceptable."
"It's an institutional clash without precedent," Di Maio said on a live-streamed Facebook video. "What's the point of going to vote if it's the ratings agencies that decide?"
"We were a few steps away from forming a government, and we were stopped because in our cabinet there was a minister who criticized the EU," Di Maio said in an interview on RAI state television.
"I want this institutional crisis to be taken to parliament... and the president tried," he added, specifying the charges would made under article 90 of the constitution, which can lead to impeachment of the president.
Head of the anti-immigrant League party, Matteo Salvini, declared an end to the process of building a new government, writing on Facebook: "We've worked for weeks, day and night, to build a government that defends the interests of Italian citizens. But someone (under pressure from whom?) told us NO."
"We are not the slaves of the Germans or the French, of the spread or of finance," he said.
On Saturday, the far-right League party and the anti-establishment 5-Star Movement stuck by Savona, challenging Mattarella to accept him or risk another election later this year.
Di Maio met Mattarella informally on Sunday to try to find a solution, a source close to the president said.
"The problem is Savona," the coalition source said, explaining that the economist had not softened some of his more eurosceptic positions.
On Sunday, Savona tried to allay concerns about his views in his first public statement on the matter. Savona has been a vocal critic of the euro and the European Union, but he has distinguished credentials, including as industry minister in the early 1990s.
"I want a different Europe, stronger, but more equal," Savona said in a statement.
Last week Savona's known criticism of the euro and German economic policy further spooked financial markets that were already concerned about the future government's willingness to reign in the country's massive debt, worth 1.3 times its annual output.
Outgoing Economy Minister Pier Carlo Padoan said on Sunday that the problem was not Savona, but the coalition's economic plan, which is "clearly unsustainable."
Padoan also said the parties should have vocally ruled out a proposal put forward in Savona's most recent book, which said Italy should draw up a "plan B" for the country to leave the eurozone with as little damage as possible if it should prove necessary.
In his statement, Savona said his position on debt was the same as that forged by the potential coalition allies in their program - which says it will be reduced not through austerity or tax cuts, but through targeted investments and policies that boost economic growth.
In Sunday's statement Savona did not refer to his opinions on the euro, but more than 70 slides outlining a "plan B" for Italy's exit from the euro, co-authored by Savona in 2015 with a dozen others, circulated on social media.
