Silvio Berlusconi was reported on Monday to be fighting a last stand to stay in power after leaders of his PDL party urged him to step down in talks on Sunday night. He faces a possible defeat in parliament on Tuesday in a vote to confirm a state financing bill which he has already lost once.
Newspapers estimated there are 20 to 40 potential defectors in his party, more than enough to bring down his government. A defeat on Tuesday is expected to lead to his immediate resignation or to a confidence vote.
Berlusconi is labelling the rebels as traitors to their country at a time of crisis and warning that his resignation would lead to an early election, which most MPs from his party don't want.
Two journalists with close links to Berlusconi fanned the speculation of his imminent departure on Monday. Giuliano Ferrara, editor of the Foglio newspaper and a former minister, said on his website: "That Silvio Berlusconi is about to resign is clear. It is a question of hours, some say of minutes."
Franco Bechis, deputy editor of the center-right Libero newspaper, said on Twitter that the 75-year-old leader would step down Monday night or Tuesday morning.
Berlusconi said on his Facebook page: "Rumors of my resignation are baseless." News agency Ansa quoted him as saying he didn't understand how such rumors could arise.
Berlusconi left Rome on Monday morning and travelled to Milan for lunch with his children.
All Italy's major newspapers speculating on Monday that Berlusconi's days in power were numbered. The pressure from financial markets is rising, with investors piling out of Italian debt on Monday, driving the yield on 10-year bonds as high as 6.67 percent, the highest since 1997. Many analysts say yields above 7 percent would make borrowing costs unsustainable for Italy's massive government debt.
Berlusconi suffered humilation at the summit of the G-20 leading economies on Friday when he had to agree to monitoring of Italy's economic reforms by the International Monetary Fund.
EU leaders and world markets are worried that Italy, the euro zone's third-largest economy, could be the next nation to get into financing trouble, which would lead to a dramatic escalation of the euro debt crisis.