Prime Minister Matteo Renzi will hand in his resignation to Italy’s president on Wednesday, three days after losing a referendum he had staked his career on.
He had promised to wait until the Senate passed the government’s 2017 budget, which it did a little earlier.
However, there is confusion over who will run the country once he resigns.
Mr Renzi is thought to favour early elections or a caretaker government. President Sergio Mattarella is reportedly hostile to an early vote.
It is up to the president to decide what happens next.
Italians voted on Sunday by a margin of 59% to 41% against Mr Renzi’s plans for constitutional reform, prompting his decision to stand down. However, Mr Mattarella asked him to delay his resignation until the budget had been passed.hanks everyone and long live Italy”
Soon after the Senate vote, Mr Renzi tweeted that he would visit the president at 19:00 (18:00 GMT). He was first due to put his proposals to colleagues in the Democratic Party (PD).
As an alternative to early elections, Mr Renzi is said to back a “government of national responsibility” involving other political parties.
It is unclear who would lead and take part in such a caretaker government. PD Finance Minister Pier Carlo Padoan’s name has been suggested, along with Senate leader Pietro Grasso, who is apolitical.
According to a source quoted in Italy, President Mattarella believes it is “inconceivable” that elections can be held before the electoral laws governing both houses of parliament are synchronised.
The law was changed to the so-called “Italicum” system last year to give the leading party a parliamentary majority through bonus seats in the lower Chamber of Deputies. But there has been no such change in the Senate, which is elected by proportional representation.
Senate reforms were part of the package rejected on Sunday. Another factor is that the constitutional court will rule on 24 January on whether the lower house reforms are legitimate.
Italy’s political turmoil has also led to days of uncertainty in international markets, amid questions over the fate of Italy’s indebted banks, especially its third largest, Monte dei Paschi, which is seeking €5bn (£4.2bn; $5.3bn) to recapitalise.
The markets moved higher and Italy’s government bond yields fell on Wednesday amid reports that the government in Rome was preparing to take a €2bn controlling stake in the bank and to ask for a €15bn eurozone loan to bail out the troubled banks.
Two of the big winners in Sunday’s referendum were the anti-EU Northern League and anti-establishment Five Star Movement, and both parties are pushing for early elections.
But other parties, such as the centre-right Forza Italia, are trailing in the polls and want elections delayed. Forza Italia leader Silvio Berlusconi, 80, had tests in a Milan hospital on Wednesday, six months after he had heart surgery.
Mr Renzi’s government still has 14 months of its mandate remaining.