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Foreign Minister Giulio Terzi - without informing Monti of his intentions - announced his resignation on Tuesday, saying he disagreed with the government's decision to send two marines accused of murder to India to stand trial.
The government's confused handling of the dispute surrounding the marines, who are accused of shooting dead two Indian fishermen during anti-piracy duty, has been a black mark on Monti's brief, 17-month government, and has led to accusations that it has cost Italy diplomatic prestige.
"This government can't wait to be relieved of its duty," Monti said during testimony about the Indian affair to the lower house of Parliament. Monti was interrupted repeatedly by heckles from right-wing lawmakers.
Only a year ago, Monti was hailed as the saviour of Italy for pulling the euro zone's third-biggest economy back from the brink of a Greek-style debt default.
But his decision to enter politics by competing in last month's elections has turned him into a scapegoat for Italy's multiple economic problems, including rising unemployment and the longest recession in two decades.
Monti's centrist alliance gathered just over 10% of last month's national vote, coming in fourth place in a contest in which no single force won a workable majority in Parliament.
As foreseen by law, Monti has remained in power to take care of routine business and will stay until a new government is formed. When that will be is hard to say and Italy is still in a political limbo.
With at most months or more likely weeks left in office, Terzi's decision to resign suggested the administration of technocrats was beginning to fall apart, something which Monti himself hinted at.
Behind Terzi's resignation are "other goals that could become more clear in coming months," Monti said, echoing speculation in several Italian newspapers that Terzi's resignation was linked to his political ambitions.
"Politically dead"
Nichi Vendola, leader of the Left Ecology Freedom party said Terzi's resignation was "the definitive collapse" for Monti, whom the widely followed political gossip blog Dagospia described as "politically dead".
During the election campaign, Monti was widely criticized for having introduced tough austerity measures that worsened an already deep recession but failed to trim debt.
Though his goal when he took office was to balance the budget by this year, last week his government announced it would raise its 2013 deficit target by half of a percentage point to 2.9% of gross domestic product.
When he took office in 2011, he had an approval rating of more than 70%. A poll taken after the elections showed that only 8% of Italians saw Monti as a leader capable of breaking the political gridlock, less than any of his rivals, including four-times Prime Minister Silvio Berlusconi.
Before entering politics, Monti was considered the top candidate to become the next head of state, a seven-year job that must be filled by mid-May.
After the vote he emerged as a possible candidate to become speaker of the Senate, a position that, in the end, he was not offered, and he has little chance of becoming president without broad support in parliament, which he no longer enjoys.
The front-page headline of Wednesday's Libero, a newspaper close to Berlusconi's centre-right, had this to say of Monti's administration: "The worst government in history."
