Italy's Prime Minister announced his resignation as he made a blistering attack on his own Interior Minister, Matteo Salvini, accusing him of sinking the ruling coalition and endangering the economy for personal and political gain.

Key points: Italy's PM unleashed a blistering critique of his deputy's actions

Italy's PM unleashed a blistering critique of his deputy's actions He accused Mr Salvini of sinking the coalition and endangering the economy

He accused Mr Salvini of sinking the coalition and endangering the economy Mr Salvini has demanded elections be held three-and-a-half years early

Prime Minister Giuseppe Conte, addressing Parliament after it was recalled from its summer recess to decide the future of the barely year-old Government, accused League party chief Mr Salvini of seeking to cash in on his rising popularity.

"[Mr Salvini] has shown that he is following his own interests and those of his party," Mr Conte told a packed Senate, with a stony-faced Mr Salvini sitting by his side.

"His decisions pose serious risks for this country."

He described Mr Salvini's actions as "serious institutional recklessness, above all showing disrespect to Parliament and liable to tip the country into a spiral of political uncertainty and financial instability".

Mr Conte, who belongs to neither of the coalition's two parties, is expected to hand in his resignation later in the day, allowing the head of state to start formal consultations with parties to see if a new coalition can be formed.

Failing that, President Sergio Mattarella would dissolve Parliament.

Italian Deputy Prime Minister Matteo Salvini kisses a rosary while sitting beside Prime Minister Giuseppe Conte. ( AP: Gregorio Borgia )

Mr Salvini at times shook his head, rolled his eyes or nodded to League senators as the Prime Minister unleashed his fierce critique of Mr Salvini's actions over the past two weeks.

Mr Salvini, who serves as Deputy Prime Minister, has presented a motion of no confidence in the Government.

But he said he was ready to keep the coalition Government alive to approve a 2020 budget and vote in a reform of Parliament before heading to early elections.

"Do you want to cut the number of parliamentarians and then go to vote? We're ready for that," he told the Senate.

"If you then want to present a courageous budget, then we are ready for that too."

Mr Salvini, who moved to sit with his League senators to give his response, rejected Mr Conte's comments, saying other parties were afraid of going to elections and losing their jobs.

Matteo Salvini is thought to be Europe's most powerful far-right populist. ( AP )

He said his political goal was to challenge the European Union's fiscal rules, which he has blamed for impoverishing the country.

Rome should spend at least 50 billion euros ($81 billion) to stimulate the chronically weak economy, he added.

"I am not afraid," he said.

On the other side of Mr Conte sat Luigi Di Maio, head of the League's now-estranged coalition partner, the Five-Star Movement, which was branded as obstructionist by Mr Salvini over the past 12 days, since he pulled the plug on their alliance.

Mr Salvini has demanded early elections, three and a half years ahead of schedule, confident his surging popularity will sweep him into power as Prime Minister and push the anti-establishment Five-Star into opposition.

Italian Prime Minister Giuseppe Conte has resigned. ( Reuters: Yara Nardi )

Reuters