The European parliament's far-right bloc faces collapse after Romanian MEPs said they would quit over an Italian colleague's "xenophobic" remarks.
Remarks by Ms Mussolini angered the Romanian delegation
Italian MEP Alessandra Mussolini, the grand-daughter of fascist dictator Benito Mussolini, reportedly described Romanians as "habitual law-breakers".
Five Romanian MEPs have threatened to quit over the "sacrilegious" remarks.
Italy recently expelled dozens of Romanian migrants suspected of criminal offences, following a murder in Rome.
The Romanian MEPs' move would take the far-right bloc's membership below the minimum required for a grouping in the parliament.
The Identity, Tradition and Sovereignty (ITS) grouping was created in January, after the accession of Bulgaria and Romania to the EU boosted the number of far-right MEPs in the European parliament.
A statement from the Greater Romania party MEPs, circulated by e-mail in the European parliament, said the party could have no further dealings with Ms Mussolini.
The party's MEPs accused Ms Mussolini of insulting Romanians, citing a newspaper interview she had given in which she said "breaking the law has become a way of life for Romanians".
The ITS group united far-right MEPs from across Europe
The newspaper also quoted Ms Mussolini as saying Italians saw little difference between Romanian immigrants and Roma (Gypsies).
The Greater Romania party has itself campaigned on a fiercely nationalistic, anti-Roma platform.
The expulsions followed an outcry over the murder of an Italian woman, blamed on a Roma migrant from Romania.
The decree authorising the expulsions prompted concerns in Bucharest that Romanian expatriates would be unfairly targeted.
The European parliament only grants official status to political groups that can claim a minimum of 20 members from at least six countries.
The withdrawal of five Romanian MEPs, from the country's Greater Romania party, would leave the ITS with only 18 members, effectively disqualifying it as an official group.
The main groups in the European parliament have largely refused to co-operate with the ITS.
Martin Schulz, the leader of the parliament's Socialist bloc, told Reuters news agency the group's demise would be "very good for Europe".
And the head of the Liberal grouping, Graham Watson, told the agency the ITS had become "a casualty" of its own xenophobic philosophy.