Pressure rose on Italy's besieged Prime Minister Silvio Berlusconi to quit on Thursday, as rebel deputies from his own centre-right party threatened to oppose the government in a vital parliamentary vote next week.
With financial markets in turmoil and Italian bonds under heavy fire, calls have been mounting from all sides for Berlusconi to step aside and make way for a new government to handle a crisis that now threatens the whole euro zone.
Six former parliamentary loyalists wrote to Berlusconi calling for a new government in a letter published in the daily Corriere della Sera.
Be the backer of a new political phase and a new government, the deputies wrote.
One of the deputies, Isabella Bertolini, said the rebels could oppose Berlusconi in a parliamentary vote next Tuesday to sign off the 2010 budget.
We are convinced that a strong political signal will come, otherwise we will see how we will act, she told reporters.
The vote could bring more rebels from the ruling PDL party out into the open, she added, if the 75-year-old premier does not change course.
We're asking Berlusconi to give us a signal. Whether it's through a reshuffle, a new government or a new premier is up to him to decide, she said.
The vote will not be a confidence motion but it is of vital importance for government business and defeat would lay bare its inability to pass legislation.
Berlusconi has repeatedly 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.
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 percent, creeping closer to the level of 7 percent which many analysts believe could lead to a so-called buyers' strike where investors take fright and refuse to buy the paper.
A government source told Reuters Berlusconi had informed his European partners at a G20 summit in Cannes on Thursday he would call a confidence vote within 15 days on new measures to face the economic crisis.
The vote would be linked to a bill currently before the Senate to which the government plans to attach the latest in a long series of promised reforms.
As growing numbers of PDL deputies desert Berlusconi, the opposition believe they could have the numbers to topple him next week.
When facing previous party revolts, the billionaire media entrepreneur has always managed to persuade enough rebels to return to the government fold to survive, but the rebellion this time looks as if it could be deadly.
The centrist UDC party said two other PDL deputies would be joining them while three members of a smaller ruling coalition bloc known as The Responsibles moved to the so-called mixed group of non-aligned deputies.
Another PDL deputy, Giuliano Cazzola, gave an interview to the online Affaritaliani daily saying Berlusconi should leave and allow another centre-right government to take power.
The government should resign and the PDL should manage a different solution without clinging to the alternative 'Us or new elections', he said, suggesting Berlusconi's chief of staff Gianni Letta could lead a new administration.
President Giorgio Napolitano said on Tuesday he was sounding out support for reform from political forces outside the ruling centre right, suggesting he was contemplating the possibility of a broad-based national unity government.
But in a statement on Thursday he said the ruling coalition had insisted Berlusconi would continue and he could carry through on his commitment to economic reform. Napolitano noted the opposition wanted a broad government of national unity.
The head of state said he would decide on his next move after seeing what happened in parliament -- an apparent reference to Tuesday's vote.
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.
Berlusconi failed to win support at a cabinet meeting late on Wednesday for the comprehensive reforms to stimulate growth and cut Italy's massive debt that he wanted to take to the G20 meeting.
His supporters accused Economy Minister Giulio Tremonti, a constant thorn in his side, of blocking a deal.
Instead of a decree that could have been put into action immediately, the cabinet meeting merely agreed on a so-called maxi amendment, containing measures to add to the bill now before the Senate.
A government statement said the amendment was in line with what had been agreed with EU partners at a summit last week but contained no details.
An official said the package included tax breaks for infrastructure investment, simplifying bureaucracy and helping youth employment though apprenticeships.
French President Nicolas Sarkozy, who has displayed increasing exasperation with unfulfilled reform promises from Rome, summed up the reaction of many when he said the question was not the content of the Italian budget package but whether it will be implemented.
(Additional reporting by Alberto Sisto in Rome, Giselda Vagnoni in Cannes; Writing by James Mackenzie; Editing by Sophie Hares)