Silvio Berlusconi's conservative People of Freedom (PdL) looked set to split after it decided to vote against the coalition government in a confidence motion Wednesday, sparking a rebellion by dozens of PdL lawmakers.
A senior PdL Senator, Roberto Formigoni, said Wednesday that 25 of the party's lawmakers were ready to form a breakaway group and vote for confidence in Premier Enrico Letta's coalition government later.
"There are already 25 of us. It's possible that others will join," Formigoni said, adding that they would later Wednesday establish an independent group called 'I Popolari' (the People's Party).
The group would position itself on the centre-right as an alternative to the centre left, he said.
Letta called the make-or-break confidence vote after Berlusconi on Saturday announced that the PdL was pulling out its five ministers from the fragile coalition with Letta's centre-left Democratic Party (PD).
Berlusconi's move came after the government approved an increase in value added tax (VAT).
Former premier Berlusconi also faces ejection from the Senate this week after a binding tax fraud conviction handed him in August by Italy's top court.
The decision by the the party's hitherto undisputed leader provoked the watershed revolt within the PdL, with dozens of Senators defying orders and declaring they would vote for the government.
The PdL moderates are not in favour of sinking the government just as Italy is showing tentative signs of emerging from its longest recession in over two decades.
Letta, whose party has a strong majority in the lower house, appeared set to win the confidence vote after the PdL defections.
He can count on at least 138 votes from the PD and centrist parties, but to be sure of winning needs at least 20 more votes for a majority.
As the debate on the confidence motion opened, Letta said Italy risked being left without a stable government if his administration fell, a situation that could prove "fatal" for the debt-laden, recession-mired country.