Italian PM-designate Giuseppe Conte has given up his bid to form a government after the country’s president vetoed his choice of economy minister.
President Sergio Matarella said he had agreed to all proposals but could not back Paolo Savona, a eurosceptic.
Mr Matarella’s move angered populist parties trying to form a coalition. Luigi Di Maio, the leader of 5-Star, called for the president’s impeachment.
Italy has been without a government since elections on 4 March.
Two populist parties, 5-Star, which won 32% of the vote, and the far-right League party, which won 18%, had agreed earlier this month after days of talks to form a coalition.
There is now a real argument in Italy between the president and the populists about this country’s position in the EU, the BBC’s James Reynolds reports from Rome.
As a stopgap move, the head of state has summoned former International Monetary Fund (IMF) economist Carlo Cotarelli potentially to take over as a non-populist prime minister.
But this appointment may not last and the only immediate solution may be an early election in which, all of a sudden, Italy’s membership of the euro and its relationship with the EU itself really are up for discussion, our correspondent adds.