Italian Prime Minister Enrico Letta said he would tender his resignation on Friday, opening the way for center-left leader Matteo Renzi to take the helm of Italy's third government in less than a year.
The decision to resign came after the Democratic Party, the largest party in the ruling coalition, supported a call by its 39-year-old leader Renzi for a more ambitious government to pull Italy out of its economic slump.
"Italy cannot live in a situation of uncertainty and instability. We are at a crossroads," Renzi told the 140-strong leadership committee.
Letta did not attend the PD meeting, saying he wanted his party to decide freely whether to continue supporting him or not. In a statement after the meeting, Letta said he would tender his resignation to President Giorgio Napolitano on Friday. Napolitano is then expected to call on Renzi to form a new administration.
Growing criticism over the slow pace of economic reform has left Letta, a low-key moderate appointed to lead the cross-party coalition patched together after last year's deadlocked elections, increasingly isolated.
"People have accused me and the PD of having an outsize ambition. I don't deny this. We all need to have this, from me to the last party member," Renzi said in his speech to the PD's leadership committee. "I am asking you to help us get Italy out of the mire," he said.
The latest bout of turmoil in Italy, the euro zone's third-largest economy, has so far had little impact on financial markets, in contrast with the volatility seen during previous crises, such as the stalemate after last year's election.
However, the continual uncertainty has held back any concerted effort to revive an economy struggling to emerge from its worst slump since World War Two or overhaul a political system blamed for hampering any deep reform program.
In his speech, Renzi acknowledged that forcing Letta out and trying to form a new government with the existing centrist and center-right coalition partners carried risks for both the government and himself personally. But he said there was no alternative.
"Putting oneself on the line right now carries an element of risk, but a politician has the duty to take risks at certain moments," he said. Renzi added that he saw the new government lasting until 2018.
If Renzi is named prime minister, he would be Italy's third unelected leader in succession after the technocrat Mario Monti and Letta, who was appointed as premier last April after weeks of fruitless wrangling between rival parties.
A sharp-talking politician, whose main experience of government has been as mayor of Florence, Renzi is not a member of parliament and has never stood in a national election. He has always said that he would only want to become prime minister with a clear mandate from voters.
However he said that until the voting law blamed for the last stalemate has been changed, a new ballot was not possible.
"The idea of elections has a certain attraction but it wouldn't guarantee a certain victory for anyone," he said during the speech.
Having burst onto the political scene promising renewal and a break with the Byzantine traditions of Italian politics, Renzi may now gain power with the same type of backroom maneuvering that characterized revolving door Christian Democrat governments of the past.
"This is a very dangerous operation by Renzi both for the country and for himself," Giovanni Toti, political adviser to former center-right Prime Minister Silvio Berlusconi, told RAI state television.
"He was supposed to be the outsider who was going to renew the PD. Now, as soon as he gets close to power, he's behaving exactly like all the others," he said.
On Thursday, Angelino Alfano, head of the New Centre Right party that supports the ruling coalition, said Letta could count on a "loyal, correct and fruitful alliance" as long as he retained the backing of the PD. Alfano was due to speak later in the evening on Thursday.