Silvio Berlusconi plunged Italy into uncertainty on Thursday after his party walked out of two key votes in parliament, raising the prospect that he could bring down the government and precipitate early elections.
The former prime minister flexed his political muscle after claiming his supporters were clamouring for him to fight the next election, scheduled for March. In an act of political brinkmanship, his People of Freedom party (PDL) walked out of the Senate, the upper house of parliament, before a confidence vote on a package of economic measures.
Later in the day they repeated the ploy in the lower house, abstaining from another vote. Mario Monti's government was still able to win both votes, but the moves were seen as sabre-rattling, designed to demonstrate that Mr Berlusconi could withdraw support at any given moment.
Fabrizio Cicchitto, the leader of the PDL in the lower house, said the decision to walk out of the votes was "to show our strongly critical view" of the Monti administration's austerity policies.
The drama came after Berlusconi said Italy was "on the edge of an abyss" and that he was being "besieged with requests" from his party to fight the elections in March in an attempt to become prime minister for the fourth time.
The most powerful opposition force, the centre-Left Democratic Party, said that if Monti did not have the full support of Berlusconi's party, the largest in parliament, then he should resign. Corrado Passera, the industry minister, earlier said a return to Berlusconi would be a step backwards for Italy. "We need to show that the country is moving forward," he said.
The abstentions marked the first time that Berlusconi, 76, and his allies had withheld their support for Monti's government since it came to power just over a year ago. In a statement released late on Wednesday after a long meeting with his party faithful, he said: "The situation today is much worse than it was a year ago when I left the government out of a sense of responsibility and a love for my country. I cannot let my country fall into a recessive spiral without end. It's not possible to go on like this."
He ignored the fact that since taking the helm, Monti has restored confidence in Italy's abilities to reform its economy and reduced the spread between Italy and German benchmark bonds to nearly half the level it was when he took over.
The prospect of another Berlusconi government rattled investor confidence. The Milan stock exchange fell, with the benchmark FTSE MIB trading 0.7% lower, while the yield on Italy's 10-year bonds rose by 0.11 percentage points to 4.51%.
Should Berlusconi decide to fight the elections, his chances of becoming prime minister look slim, with opinion polls showing support for his party at about 15%. The sex scandals which in part led to Berlusconi's fall are still being played out. On Monday a court in Milan is expected to hear from Karima El Mahroug, known as Ruby the Heart Stealer, the Moroccan-born dancer whom Berlusconi is accused of paying for sex during parties when she was an alleged under-age prostitute.
He denies the charges. A verdict in the trial is expected early next year and could overshadow any political return.