Italy crisis: PM Letta battles for parliament support
Italian Prime Minister Enrico Letta is battling to rescue his coalition after five ministers loyal to former PM Silvio Berlusconi pulled out.
A confidence vote will be held in parliament on Wednesday.
Tensions are running high between Mr Letta's centre-left grouping and Mr Berlusconi's centre-right party.
Jitters about Italy's economic reforms hit government borrowing and shares. The Milan stock market fell almost 2% and the interest rate on bonds rose.
The current coalition government was put together with difficulty after inconclusive elections in February. Italy's economy, the eurozone's third-largest, is struggling to achieve any growth and Mr Letta is trying to push through unpopular austerity measures.
The government's debt burden has grown to about two trillion euros (£1.7tn; $2.7tn). It reached 127% of total national output (GDP) in 2012 and is forecast to go above 130% this year.
Berlusconi pulled his five ministers out of the administration on Saturday. He has attacked the government's failure to prevent a rise in VAT (sales tax) to 22%.
But those ministers have now given mixed signals as to whether they are actually leaving the government.
After meeting the prime minister, President Giorgio Napolitano said the rebel ministers' equivocation had led to a "climate of evident uncertainty regarding possible developments".
Because of that, Mr Letta would go before parliament to see "what could be done".
Mr Letta clearly believes his centre-left grouping, led by the Democratic Party (PD), still has a chance of attracting enough support in parliament to continue in government, says the BBC's Alan Johnston in Rome.
The crisis follows weeks of worsening ties between Berlusconi's party and Mr Letta's grouping.
Berlusconi's legal problems have cast a long shadow over the coalition, with the former PM threatening to undermine it if he was expelled from the Senate for tax fraud.
A committee of the Senate is due to decide on his expulsion this week after the Supreme Court recently upheld his conviction.
Mr Letta warned late on Friday that he would resign unless his coalition cabinet won a confidence vote.
But Berlusconi pre-empted that, describing Mr Letta's comments as "unacceptable". He later said all five ministers of his People of Freedom (PDL) party were resigning.
However, most of the five ministers appeared to challenge the former prime minister's order to leave the coalition.
"I thoroughly understand his state of mind, but I cannot justify or share the strategy," said Health Minister Beatrice Lorenzin. Reforms Minister Gaetano Quagliarello and Transport Minister Maurizio Lupi also appeared reluctant to pull out of the cabinet.
"We want to stay with Berlusconi but not his poor advisers," Mr Lupi said.
Mr Letta had responded angrily to Saturday's resignations, accusing the PDL leader of telling Italians a "huge lie" in using the sales tax as an "alibi" for his own personal concerns.
The February election failed to produce a clear majority for centre-left or centre-right.
The narrow victory for the centre-left, led by the PD, gave it 55% of the seats in the Chamber of Deputies automatically.
But in the Senate there is no automatic majority. There the difference is just a few seats - and the government needs to control the Senate to rule effectively.