Rome Italian President Sergio Mattarella has thwarted Prime Minister Matteo Renzi's plan to quickly resign by telling him to keep doing his job until Parliament sorts out the nation's budget for next year.
The move was seen as an attempt to reassure markets amid uncertainty about Italy's political future.
The budget law was approved by the Lower House of Parliament on November 28, but still needs Senate ratification, and local media said it could come by Friday.
"Considering the need to complete the parliamentary approval of the budget law to stave off risks of (emergency budget procedures), the president of the republic has asked the prime minister to defer his resignation and hand it in once the task is fulfilled," Mattarella's office said.
Renzi saw Mattarella twice during the day, and after the first meeting the President called for "calm" and, in a likely reference to the budgetary issue, said institutions have "in any case to meet commitments and deadlines".
Italy's leftist leader is on the way out after losing a referendum on constitutional changes that he turned into a personal plebiscite. More than 59 per cent of Italians voted against his reform, with a high turnout of 65.5 per cent.
The Prime Minister chaired a farewell cabinet meeting and posted a video on Facebook listing his achievements over nearly three years of government: "1000 difficult, but beautiful days (in office). Thanks to everybody, hurray for Italy."
It falls on Mattarella to steer the political crisis. His basic options are cobbling together a new government, which Renzi's Democratic Party (PD) would have to support as the dominant group in Parliament, or call snap elections.
The main opposition party, the anti-establishment Five Star Movement (M5S), has called for a quick national poll. Under current voting rules, the M5S would be favourite to win a majority in the lower chamber of Parliament, but not in the upper one.
The prospect of a M5S government would likely antagonise the rest of the European Union, as the party's radical platform includes calls to renegotiate Italy's huge public debt and a referendum on eurozone exit.
- DPA, AAP