This combo photo shows Italian Prime Minister Giuseppe Conte (right) and former premier Matteo Renzi, leader of the Italy Alive party. (PHOTOS / AFP)

The government of Italian Prime Minister Giuseppe Conte is at risk of collapsing as a junior ally prepared to abandon the coalition as early as Wednesday, just as the administration seeks to push through measures to battle the pandemic and boost the economy.

Ex-Premier Matteo Renzi, leader of the Italy Alive party, will hold a news conference at 5:30 pm in Rome after a decision on whether to pull his two ministers out of the coalition in a long-simmering clash with Conte. Renzi’s party has only 3 percent support in opinion polls but a pullout would still rob Conte of his parliamentary majority.

A Renzi move to pull his ministers from the coalition would rob Conte of his parliamentary majority. Possible scenarios could include a third Conte government, a similar coalition with a different premier, or an early election

Renzi’s ministers are expected to resign from the government in a letter they will send at 5 pm Wednesday afternoon, daily la Repubblica reported.

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Markets are watching. After sliding Tuesday, Italian bonds were trading steady at the start of the European session. Ten-year yields were at 0.65 percent, with the spread over their German peers at around 114 basis points, close to a one-week high.

“We don’t want to be in government at all costs, if you want us to be in the government, listen to our ideas,” Renzi said in an interview with Rai state television Tuesday night.

If the former premier makes good on his threat, Conte could seek a parliamentary vote of confidence. But if he fails to win over enough centrist and unaffiliated lawmakers, Conte’s government would become a caretaker administration with limited powers to make policy decisions. If he resigns, however, he could be given a mandate by President Sergio Mattarella to try to forge a new alliance.

Other possible scenarios following a Renzi pullout include a similar coalition with a different premier, a broad alliance headed by a figure like ex-European Central Bank president Mario Draghi, or an early election. Surveys show the center-right opposition would likely win a new ballot.

A new round of uncertainty and political maneuvering could hamper the government’s plans to impose tighter restrictions to curb the virus, which has infected more than 2 million in the country to date, and to push through measures to help businesses hit hardest by the pandemic.

Renzi has taken Conte to task over his plan for spending Italy’s estimated 196 billion-euro share of the European Union’s (EU) recovery package. The plan was approved early on Wednesday during a night-time cabinet meeting, Conte’s office said in a statement.

The former premier has escalated pressure on Conte since late last year, slamming the prime minister’s plans for managing and spending EU funds. Renzi says the plan has been improved following his demands, but he’s insisting on further conditions, including that Italy tap a European Stability Mechanism credit line for health spending.

Renzi also wants Conte to share power with coalition parties, spend more on healthcare and give up control of the country’s secret services.

Political maneuvers

A new round of uncertainty and political maneuvering could hamper the government’s plans to impose tighter restrictions to curb the virus, which has infected more than 2 million in the country to date, and to push through measures to help businesses hit hardest by the pandemic.

READ MORE: Why do Italian governments collapse so often?

The machinations will also likely stall a series of contested corporate moves including the sale of infrastructure giant Atlantia SpA’s stake in highway operator Autostrade per l’Italia SpA, the rescue of flagship airline Alitalia and the search for a buyer for bailed-out lender Banca Monte dei Paschi di Siena SpA.

Conte, a former law professor, could seek to obtain support in parliament - though he would face a tough vote in the Senate - or attempt to carve out a new administration. Conte was plucked from obscurity in 2018 to head a government with Five Star and the anti-migrant League. He forged a second coalition with Five Star and the Democratic Party the following year, after League leader Matteo Salvini ditched the alliance.

The government of Italian Prime Minister Giuseppe Conte is on the brink of collapse after a junior ally renewed a threat to abandon the coalition, jeopardizing the country’s attempt to counter the pandemic and salvage its economy.

Ex-premier Matteo Renzi, leader of the Italy Alive party which is languishing at 3 percent in opinion polls, said his group will decide Wednesday whether to topple Conte’s government by withdrawing its ministers.

“We don’t want to be in government at all costs, if you want us to be in the government, listen to our ideas,” Renzi said in an interview with Rai state television Tuesday night. “Tomorrow morning we’ll decide and tomorrow afternoon we’ll give our decision in a press conference.” The press conference will be at 5:30 pm Rome time, Ansa news agency reported.

A Renzi move to pull out his ministers from the coalition would rob Conte of his parliamentary majority and come at the worst possible time for the country, which has been waging a battle against a worsening pandemic and a recession, while taking on the presidency of the Group of 20 nations.

Conte 3

Possible scenarios could now include a third Conte government, a similar coalition with a different premier, a broad alliance headed by a figure like ex-European Central Bank president Mario Draghi, or early elections. Renzi said in the television interview that he believes Conte on Wednesday will unveil a group of lawmakers ready to support him.

Surveys show the center-right opposition would likely win a new ballot.

Renzi has taken Conte to task over his plan for spending Italy’s estimated 196 billion-euro (US$239-billion) share of the European Union’s recovery package. The plan was approved early on Wednesday during a night cabinet meeting, Ansa reported.

The former premier has escalated pressure on Conte since late last year, slamming the premier’s plans for managing and spending EU funds. He says the plan has been improved following his demands, but he’s insisting on further conditions, including that Italy tap a European Stability Mechanism credit line for health spending.

He also wants Conte to share power with coalition parties, spend more on healthcare and give up control of the country’s secret services.