Virus-plagued Italy in political turmoil after PM quits

He will stay on in a caretaker capacity while President Sergio Mattarella, the ultimate arbiter of Italian political crises, discusses the next steps with party political leaders, starting Wednesday.

Conte wrote on his Facebook page that Italy was "going through a truly difficult time" which required "a clear perspective and a government with a larger and safer majority".

"My resignation serves this possibility: the formation of a new government that can offer a prospect of national salvation," he wrote, adding he hoped to form an administration that was "loyal to European ideals".

The centre-left coalition that has led Italy since September 2019 was dealt a fatal blow earlier this month by the withdrawal of former premier Matteo Renzi's small but crucial Italia Viva party.

Ahead of a key vote in parliament that he looked set to lose, Conte submitted his resignation to Mattarella, the first step in trying to form a new government with a strengthened majority.

Conte's exit, which follows weeks of tensions between him and Renzi over the government's handling of the pandemic, barely caused a ripple on the financial markets.

But it leaves a vacuum at the top of the eurozone's third largest economy as a major decision looms on how to spend billions of euros in European Union recovery funds.

Renzi had criticised Conte's 220-billion-euro ($267 billion) spending plan as a wasted opportunity to address some of Italy's long-term structural problems.

"Italy's political crisis could hinder attempts to agree and implement a credible post-pandemic growth strategy," the Fitch ratings agency said in a statement.

Italy was the first European country to face the full force of the pandemic and has since suffered badly, with the economy plunged into recession and deaths still rising by around 400 a day.

Parts of the country remain under partial lockdown and the vaccination programme has slowed -- a problem the government has blamed on delays in deliveries from pharma giant Pfizer.

"With a government that has resigned, everything will be slower and more difficult," warned Foreign Minister Luigi Di Maio, one of the leaders of the populist Five Star Movement (M5S), the largest in parliament.

He urged lawmakers to get behind Conte, saying: "It is the moment of truth, in these hours we will know who defends and loves our nation and who only thinks of their own benefit."

Conte survived a vote of confidence in parliament last week but failed to secure an overall majority in the upper house, the Senate.

With his government set to lose a vote on judicial reform on Wednesday or Thursday, the premier resigned to preempt a defeat that would have made his position untenable.

But it is far from clear that Conte can convince the president he can form another government, noted Wolfango Piccoli of the Teneo consultancy.

If he fails, the M5S and the other main coalition partner, the centre-left Democratic Party (PD), could "ditch Conte and look for another candidate" to head a new coalition government.

Despite condemning Renzi for causing the crisis, the PD is already making overtures to bring his Italia Viva party back into the fold.

PD Defence Minister Lorenzo Guerini told La Repubblica newspaper that Conte is "irreplaceable" but said it was time for the ruling coalition to regroup, Italia Viva included, around "a new political pact" lasting until 2023.

All the ruling parties want to avoid snap elections, which opinion polls suggest would hand power to the centre-right opposition comprising billionaire former premier Silvio Berlusconi's Forza Italia and Matteo Salvini's far-right League party.

Conte, a once obscure law professor, has already led two governments of different political shades since taking office after the 2018 general election.

The first was a fractious and unashamedly populist coalition between M5S and Salvini's League, which ended when the latter pulled out in August 2019.