Efforts to form a coalition government collapsed on Sunday after the Italian president rejected a eurosceptic pick for the key economy ministry, triggering a possible constitutional crisis and opening the prospect of fresh elections.

France24 reports Italy's PM-Designate Gives Up on Efforts to Form a Government, May Mean New Election.

The leaders of the two parties trying to field a government, the far-right League and anti-establishment 5-Star Movement, accused President Sergio Mattarella of abusing his authority and working under the orders of European powers.

5-Star leader Luigi Di Maio, whose party won the most seats at an inconclusive March 4 vote, demanded that parliament impeach Mattarella, raising the spectre of political turmoil in the eurozone's third biggest economy.

Looking to allay investor concerns, Mattarella vetoed on Sunday the choice of 81-year-old economist Paolo Savona, a vocal critic of the single currency, to the pivotal economy post. Prime Minister-designate Giuseppe Conte promptly abandoned his efforts to form a government.