By Angelo Amante and Gavin Jones
ROME (Reuters) - Italian President Sergio Mattarella begins two days of talks with parties on Wednesday to seek a way out of a political crisis that will lead to the formation of the country's 67th government since World War Two or to early elections.
Prime Minister Giuseppe Conte resigned on Tuesday after launching a blistering attack on his own interior minister, Matteo Salvini, accusing him of sinking the coalition and endangering the economy for personal and political gain.
In a shock move on Aug. 8, Salvini, leader of the far-right League party, declared that his alliance with the anti-establishment 5-Star Movement was dead and called for elections.
Salvini had repeatedly promised that the 14-month-old government would last a full five-year term and appeared confident his move would trigger early elections, allowing him to cash in on the League's surging popularity.
But the gambit could backfire and open the door to power for his rivals.
Politicians from 5-Star and the center-left Democratic Party (PD) are openly discussing forming a new coalition that would push the League into opposition and give Italy a more centrist, pro-European government.
"The interior minister has shown he is following his own interests and those of his party ... his decisions pose serious risks for this country," Conte, who does not belong to either ruling party, told the Senate on Tuesday before heading to the president's palace to resign.
Financial markets rallied on Conte's resignation, seemingly hopeful that a 5-Star/PD coalition can be ushered in and snap polls avoided.
Some investors fear that if Salvini uses elections to form a League-led government as prime minister, he will ramp up spending and set the heavily indebted nation on a collision course with the European Union.
Germany's finance minister said on Wednesday that a new coalition in Italy looked likely and that there was no sign of a looming euro zone crisis due to the political upheaval in Rome.
"It looks as if a new government, perhaps with a different composition, will emerge," German Finance Minister Olaf Scholz told German television.
'WE OUGHT TO TRY'
Mattarella will meet with all the parties in parliament, one by one, to see if a new coalition can be formed. Failing that, he would have to dissolve parliament, 3-1/2 years ahead of schedule, to allow for autumn elections.
He will begin with minor groups at 1400 GMT but will not hear the main parties until Thursday, concluding with 5-Star at 1500 GMT.
The PD's leadership is also scheduled to meet at 0900 GMT on Wednesday to discuss the prospect of joining forces with 5-Star. The two parties have been bitter political foes for years.
"We ought to try and form a government, if it were possible," former prime minister Matteo Renzi, an influential force in the PD, told France 2 TV ahead of the party meeting.
Salvini said on Tuesday he would repeat to the president that he wants new elections following the March 2018 vote that led to the 5-Star/League government. However, newspaper Corriere della Sera said on Wednesday that he privately had doubts.
"There is only a 10% chance (of going to a snap election)," the daily quoted Salvini as telling his aides.
Salvini has accused the other parties of trying to cobble together a deal because they fear a return to the polls, but Conte said fresh political uncertainty was the last thing Italy needed as it prepares a difficult 2020 budget in the autumn.
"Getting citizens to vote is the essence of democracy. Urging them to vote every year is irresponsible," the outgoing premier said.