The Christian Democrat UDC party would continue to support Berlusconi's government in parliament, European Affairs Minister Rocco Buttiglione said on Friday after the party held emergency talks.
But the UDC wants Berlusconi to resign and form a new cabinet. The coalition is reeling after a severe electoral defeat in regional elections this month.
Berlusconi has refused to resign, hoping he would be able to weather the storm with a small cabinet reshuffle and a new government programme. The UDC is not the only party in the coalition demanding change.
Gianfranco Fini, the cabinet's other deputy premier and leader of the key National Alliance (AN), demanded on Thursday that the premier present a new programme to parliament and face a vote of confidence.
Other members of AN have said they will prefer an entirely new government but are not insisting on it. Another small group, the New Italian Socialist Party, also withdrew its two junior ministers from the government on Friday but will continue to support Berlusconi.
The opposition wants Berlusconi
to resign after ministers quit
Opposition leaders, meanwhile, said Berlusconi should resign after the ministerial withdrawal.
Berlusconi "must, as of today, hand in his resignation and formally open a government crisis", said Piero Fassino, the leader of Italy's largest left-wing party. "Any further delay would only deepen the crisis in the country."
Before the announcement, Berlusconi said the UDC's decision would not make him resign. "I'm not scared of a crisis. If others want to betray the will of the Italian people, it has nothing to do with me."
But a UDC pullout could force the prime minister into early polls. The centre-right alliance lost six of the eight regions it controlled in 3-4 April elections that many saw as a dress rehearsal for parliamentary polls due next year.
Meeting with members of his Forza Italia party after a tense summit with coalition party leaders on Thursday, Berlusconi admitted he faced a tough choice of resigning and forming a new government or calling early elections, the daily La Repubblica reported on Friday.
Berlusconi, whose term ends in May 2006, is reportedly wary of being dependent on the goodwill of the UDC's 34 parliamentarians to get any law approved.
Short of majority
"I just can't accept the idea that they will be outside the government and blackmailing us on every point, every law," Berlusconi was quoted as saying by La Repubblica. Berlusconi would be a few votes short of a majority if the UDC were to vote against him in parliament.
Ministers of the coalition's third-largest party, the Northern League, are reportedly turning toward the option of early elections.
The government survived six
confidence votes last year
"Let's go to elections" with a union of Forza Italia and the Northern League, Roberto Calderoli, cabinet minister and member of the league, was quoted as saying.
Others were dismayed that Italy should be subjected to another crisis in Berlusconi's government, which survived six confidence votes last year.
Christian Democrat politician Gianfranco Rotondi said the latest crisis was further proof of a quip attributed to fascist dictator Benito Mussolini: "Governing Italians is useless."