Italian Prime Minister Mario Monti will step down after the party of former premier Silvio Berlusconi withdrew its support in parliament, dpa reported.
Monti, who came to the decision after consultations with President Giorgio Napolitano late Saturday, will try to reach a budget deal before resigning. The premier since November 2011 is expected to resign before Christmas.
Berlusconi had confirmed earlier Saturday he would run again for the top post in parliamentary elections that had been planned for next year.
Ending weeks of speculation, Berlusconi said his centre-right People of Freedom Party (PDL) had failed to find a suitable candidate and he would run "once again, out of responsibility."
The head of the PDL, Angelino Alfano, had said earlier this week that Berlusconi would be their lead candidate, after scrapping planned primary contests.
Berlusconi, 76, resigned in November 11 amid the country's economic plight, and was replaced by the non-partisan technocrat Monti.
The PDL withdrew from the pro-Monti coalition on Thursday, abstaining on two key parliamentary votes. It reacted to Business Minister Corrado Passera saying a comeback by scandal-plagued Berlusconi would be seen by the rest of the world as Italy "going backwards."
Monti's government, which has been enjoying cross-party support, has won international praise amid the eurozone crisis for getting to grips with Italy's debt problems, but stoked popular resentment at home with its tough austerity measures.