Silvio Berlusconi’s main coalition partner Umberto Bossi of the Northern League has called on the embattled prime minister to step down and make way for the former justice minister Angelino Alfano.
Bossi told reporters that 'we asked the prime minister to step down,' as the political uncertainty in Italy has sent the cost of government borrowing soaring.
In recent hours the yield on Italy's 10-year bonds peaked at 6.74%, dangerously close to the 7% mark that signalled bailouts for Ireland, Greece and Portugal. Yields have since fallen back to 6.6%.
Berlusconi's government has come under ever-increasing pressure to enforce quick reforms to ensure Italy doesn't fall into a Greek-like situation.
However, questions about the ability of Berlusconi to actually implement any meaningful austerity measures has constantly been questioned. Notably in recent weeks, Nicolas Sarkozy and Angela Merkel exchanged exasperated smirks when asked whether they thought their Italian colleague could do what was needed.
A key vote on the budget is to take place this afternoon, and with this latest development from Bossi, it seems that Berlusconi's coalition is slowly unravelling.
Italian news agency ANSA has recently reported that Italy's finance minister Giulio Tremonti has recently departed a meeting of eurozone finance ministers in Brussels to return to Rome.
Economics professor Nouriel Roubini tweeted that if Berlusconi is forced out, a competent leader had to be chosen: 'Replacing Berlusconi with one of his servile lackeys is unacceptable. Italy needs a credibile government run by a respected and competent leader.'
Berlusconi has survived over 50 votes of confidence before but not in such a difficult climate. It looks like he could be the next political casualty in the eurozone crisis following the resignation of Greek leader George Papandreou earlier this week.
Greece braces itself for unity government
While the Greek prime minister is ready to step down, political leaders are still debating the precise formation of a national unity government and who exactly will replace the lame-duck Papandreou.
Talks yesterday between Papandreou and opposition leader Antonis Samaras produced no decisive outcome. However, today Papandreou formally asked his cabinet ministers to resign, and he told ministers to expect a successor by the evening.
The new government will have to ratify the new EU bailout otherwise the country will hit bankruptcy by the end of the year. While that may seem a no-brainer, the new national unity government will also have to ensure new austerity measures are forced through, which will be difficult given the anger and mounting protest shown by the Greek populace.
Lucas Papademos, former vice president of the European Central Bank, is the favourite to succeed Papandreou.