Italy's Five Star Movement threw its weight behind Prime Minister Giuseppe Conte in a potential no-confidence motion by Deputy Premier Matteo Salvini as Five Star and the opposition Democratic Party considered a new alliance, potentially derailing League leader Salvini's plans to hold an early election, Bloomberg News and Reuters reported.
In a statement, Five Star said Salvini was "no longer a credible interlocutor" and that it will back Conte, who is due to speak before the Senate on Aug. 20.
Italian sovereign bonds came under pressure, with 10-year yields adding 5 basis points around 1:48 p.m. local time.
The Italian government, an alliance between Five Star and the League, was thrown into crisis Aug. 8 as Salvini called for elections amid persistent policy differences with its coalition partner. The League emerged as the biggest Italian party in the European parliamentary elections in May.
President Sergio Mattarella has the power to dissolve parliament and call other parties to form an alternative ruling coalition or trigger an election.