|Berlusconi failed to take a concrete plan concerning the Italian economy to the G20 summit in Cannes [EPA]
Six former parliamentary allies of Silvio Berlusconi have urged him to quit after his cabinet failed to approve an urgent economic reforms programme.
The rebel deputies, three of whom have already left the Italian premier's shaky coalition, wrote to him saying
Italy needed a "new political phase and a new government".
The letter was signed by Roberto Antonione, Isabella Bertolini, Giustina Destro, Fabio Gava, Giancarlo Pittelli and Giorgio Stracquadanio.
Berlusconi has rejected calls to stand aside and make way for an interim government, saying the only alternative would be to hold early elections next spring, a step he says would be irresponsible while the crisis continues.
Berlusconi, who is in southern France for the G20 summit, has informed his European partners that he would call a confidence vote within 15 days on new measures to face the economic crisis.
But all of that could fall apart before then if more government rebels join the opposition in an important vote on Tuesday to sign off on the 2010 budget.
Berlusconi failed to win support at a cabinet meeting late on Wednesday for the comprehensive reforms to stimulate growth and cut Italy's debt that he wanted to take to the G20 meeting in Cannes.
Instead, there were only plans to add amendments to bills already before parliament, such as tax breaks for infrastructure investment, simplifying bureaucracy and helping youth employment though apprenticeships.
The Italian president, Giorgio Napolitano, said on Tuesday he was sounding out support for reform from political forces outside the ruling centre-right coalition, suggesting he was contemplating the possibility of a broad-based national unity government.
But in a statement on Thursday, he said the government had insisted Berlusconi could continue, there was no alternative to him, and he could carry through on his commitment to economic reform. On the other hand, opposition leaders wanted a unity government, Napolitano said.
The head of state does not have the power to dismiss a government with a parliamentary majority but as growing numbers of deputies desert Berlusconi, the opposition believe they could have the numbers to topple him as early as next week.
With doubts over Greece's future in the euro zone already causing havoc in the markets, the renewed political uncertainty in Rome racked up pressure on Italian government bonds.
Yields on 10-year BTP bonds hit more than 6.3 per cent, creeping closer to the level of seven per cent which many analysts believe could lead to a so-called buyers' strike where investors take fright and refuse to buy, the Reuters news agency reports.
With Greece teetering on the brink of possibly leaving the euro, the future of Europe's single currency could now depend on preventing a meltdown in Italy, which would overwhelm the bloc's current defence mechanisms.