Tria had committed to holding the deficit below 2 percent of gross domestic product but buckled under pressure from the coalition to set a target of 2.4 percent in what was seen as a humiliating defeat for the economics professor.

He is now in the middle of a power struggle between his paymasters from the right-wing League and the anti-establishment 5-Star Movement who need money to fulfill election pledges, and a European Union that is insisting on fiscal constraint.Investors are nervous. Italian 30-year bond yields hit a four-year high on Tuesday above 4 percent on concerns talks between the coalition and Brussels could turn sour, with Tria, the face of economic moderation, side-lined.