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Italy 's president has hinted that fresh elections could turn into a referendum on the country's membership of the European Union (EU) and the eurozone.
"The uncertainty over our position has alarmed investors and savers both in Italy and abroad," said Sergio Mattarella after he refused to approve the populist parties' choice of eurosceptic economy minister and asked Carlo Cottarelli , an economist with experience at the International Monetary Fund (IMF), to become Prime Minister.
"Membership of the euro is a fundamental choice. If we want to discuss it, then we should do so in a serious fashion," he added.
Mr Cottarelli has been asked to form a technocrat government to plan for the polls and pass the next budget.
Italy, the eurozone's third-largest economy, has been trying to form a new government since inconclusive election results in March.
Weeks of political uncertainty have taken a toll on Italy's stock and bond markets, and such fears look set to continue as the elections are likely to be fought over Italy's role in the EU.
The move led the Five Star Movement and anti-immigration League party to accuse him of betraying voters and call for his impeachment.
Italy's president, Sergio Mattarella, refused to approve the populist parties' choice of eurosceptic economy minister (AFP/Getty) "This isn't democracy, this isn't respect for the popular vote," said Matteo Salvini of the right-wing League. "It's just the last gasp of the strong powers who want Italy as a frightened, precarious slave."
"The next elections will be a plebiscite: the people and real life versus the old castes and the 'Lords of the Spread,"' Mr Salvini said, referring to financial speculators.
His anger was shared by Luigi Di Maio , the populist Five Star leader who had hoped to govern with Mr Salvini, who repeatedly called for the president's impeachment.
He called for a rally in Rome on Saturday, a gathering which is likely to double as a campaign rally.
Mr Cottarelli, the premier-designate, said a return to the polls could come as early as the August holiday break or the start of 2019 at the latest.
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He pledged his government would uphold Italy's "essential" role in both the EU and the eurozone and promised "prudent management of our public accounts."
Mr Cottarelli, who has been called "Mr Scissors" because of his reputation for trimming excess public spending, said elections could come as soon as "after August" if his cabinet fails to gain the required confidence votes in both chambers of parliament.
Such an outcome looks unlikely however, as he is opposed by both the Five-Star Movement and the League, who have enough votes to sink his nascent government.
Polls suggest the League, which won 17 per cent of the vote in March, would see a surge of support in a new ballot, while support for the Five Star Movement has remained strong.
Both populist parties have pledged to lower taxes, roll back planned pension cuts and increase welfare spending, at a cost of tens of billions of euros.
Their agreed joint programme also proposed to repatriate irregular migrants and block landlords from hosting refugees who have entered Italy via the Mediterranean.
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