Premier Mario Monti told the Italian president Saturday he is resigning soon, saying he can no longer govern after Silvio Berlusconi's party withdrew crucial support. It paves the way for early elections a year after the unelected economist helped pull the country back from the brink of financial disaster.
Only hours earlier, Berlusconi announced he would run for a fourth term as premier, aiming for a dramatic comeback, considering the billionaire media baron quit in disgrace in November 2011.
The office of President Giorgio Napolitano, who met for nearly two hours with Monti at the presidential palace, said the premier told the head of state that without the support of Berlusconi's party, "he cannot further carry out his mandate, and consequently made clear his intention to resign" once Parliament passes a crucial budget bill soon.
Political turmoil in Italy, mired in recession and trying to escape the eurozone sovereign debt crisis, could spook financial markets, which, with Monti at the helm, had steadily regained faith in the country's ability to honor its debts.
Standard & Poor's rating agency, indicating on Friday that it could lower Italy's rating if the recession endures well into 2013, cited "uncertainty" over whether the next Italian government could stay the tough course of austerity Monti's nonpartisan government moved through Parliament.
Monti is an economist appointed by Napolitano a year ago to head a non-elected government of technocrats that replaced Berlusconi. The premier told Napolitano he would quickly consult with political leaders on prospects for swift passage of the "financial stability" budget law critical to soothing market fears.
The presidential palace statement said Monti warned that if lawmakers didn't pull together behind the bill, that would render "ever more grave the consequences of a government crisis, on a European level as well."
Political instability could send the "spread" --the difference in interest between benchmark German bonds and Italian ones -- back soaring again. Monti toiled to shrink the spread.
With elections ever closer, politicians would be loath to shoulder the blame for fueling the crisis. Both Berlusconi's party, and its rival center-left Democratic Party, would likely quickly approve the budget law in the next few weeks.
The Democratic Party's candidate for premier, Pier Luigi Bersani, decried the "irresponsibility" of Berlusconi's party in "betraying the commitment it made a year ago in front of the nation" to back Monti. Bersani said his party would work "as swiftly as possible" for the law's passage.