Italian Prime Minister Mario Monti
Italian Prime Minister Mario Monti says he plans to resign after Silvio Berlusconi's PDL party withdrew its support for the government.
Monti, who heads a non-elected cabinet of technocrats, said he will try to pass a budget and financial stability law before standing down.
Hours earlier, former Prime Minister Berlusconi said he will run for office again next year.
He said Monti's austerity policies had harmed Italy.
Berlusconi's People of Freedom party withdrew its support from the government on Thursday.
A statement from the office of President Giorgio Napolitano said that Monti "does not think it possible to continue his mandate and consequently made clear his intention to present his resignation".
If the law for next year's budget can be passed "quickly", Monti would immediately confirm his resignation, the statement said.
Earlier, Berlusconi confirmed he would lead his party into next year's elections - now on course to be held slightly earlier than expected.
An election must come within 70 days of the government resigning. Italy had been due to go to the polls by April at the latest.
Berlusconi said he felt a "responsibility" to step back into the arena because of the severity of the country's economic problems.
The BBC's Alan Johnston in Rome says that Berlusconi's critics will argue he is only interested in being in a powerful enough position to protect his own business and other interests.
Berlusconi, 76, resigned in November 2011 over Italy's economic troubles.
He was convicted of tax fraud in October, though he is appealing against that ruling.