Italy's political crisis comes to a head on Tuesday with speculation that Prime Minister Giuseppe Conte will resign after far-right Interior Minister Matteo Salvini pulled the plug on the dysfunctional coalition government.

Conte is due to speak in the Senate today following a week of fallout from Salvini's dramatic decision to back out of the alliance on August 8, plunging the eurozone's third-largest economy into political turmoil.

Salvini's anti-immigrant League party has been soaring in opinion polls during months of squabbling over key policy decisions with the anti-establishment Five Star Movement (M5S).

Salvini, who is also deputy prime minister, hopes to trigger early elections, which polls suggest his League party and right-wing allies could win.

Conte is expected to make a speech, widely touted to be scathing of Salvini's behaviour, but it is not yet clear whether he will then immediately resign or wait for the outcome of a no confidence vote.

The likely end to the 14-month-old government would open the way for President Sergio Mattarella to begin consultations with political parties, with a range of options available.

A snap election, the forming of a new coalition without holding new elections and, although unlikely, the continuation of the current government, would all be considered.

Ahead of Conte's speech, Salvini told Radio 24: "What is the point of a government with everyone 'against Salvini'? A government must be strong to be able to act."

Debt-laden economy

The political crisis has raised concerns about the Italian economy, whose debt ratio at 132 percent of gross domestic product is the second-biggest in the eurozone after Greece.

Since the unwieldy government was formed in June 2018, uncertainty under the coalition has cost the country an extra $5.54 billion in interest on its debt, the Il Sole 24 Ore financial daily said on Monday.

Salvini's hope for a snap election ─ more than three years early ─ had envisioned a vote in October followed by him being crowned as prime minister.

According to opinion polls, the League could form a coalition with the anti-immigration, anti-LGBT Fratelli d'Italia, and possibly Silvio Berlusconi's centre-right Forza Italia.

But a bid by his rivals to put aside their differences and forge an alliance could derail Salvini's plan, with a coalition between M5S and the opposition centre-left Democratic Party (PD) being discussed.

While there is bad blood between the two parties, M5S is languishing in the polls and wants to avoid an early election.

A PD-M5S coalition could lead to the opposite of what Salvini intended ─ with him out of government altogether instead of being its sole leader.

'Untrustworthy traitor'

Romano Prodi, the former centre-left premier and ex-president of the European Commission, has also proposed a unity government from different parts of the political spectrum involving M5S, the PD and Forza Italia.

After a year of highly critical anti-EU rhetoric from Salvini, Prodi said the new coalition would allow a "reintegration of Italy as an active member of the European Union".

Caught on the back foot, Salvini has sought to re-establish some ties and said he would be willing to back a M5S proposal to cut the number of lawmakers from 950 to 605, but only if new elections were then swiftly held.

He was furious at the idea of being squeezed out by a M5S-PD alliance, saying he would get his supporters to "peacefully take to the streets" if it came about.

Salvini has also softened his tone regarding the premier, saying: "Conte remains my prime minister and my phone is always on."

But M5S founder, comedian Beppe Grillo, has rejected talk of reconciliation with Salvini, whom he reportedly described as an "untrustworthy traitor".

Italian media on Tuesday quoted Conte as saying "never again with the League".