Italy's PD party says M5S leader Luigi Di Maio is demanding to be both deputy prime minister and interior minister in a new coalition
Fraught negotiations between Italy's anti-establishment Five Star Movement and the centre-left Democratic Party, which had appeared on the brink of collapse, were revived at the last minute Tuesday as the once bitter rivals attempted to form a new government.
The Five Star Movement (M5S) had threatened to torpedo the talks, insisting its choice of prime minister was a red line.
The parties have been trying to create a workable coalition following the collapse of the country's populist government -- despite having been at each other's throats until just a few weeks ago.
Italy's President Sergio Mattarella had on Monday allowed an extra day for negotiations, interpreted by some as a hopeful sign that a deal may be in the works.
But the M5S issued a sharp statement Tuesday accusing the Democratic Party (PD) of rejecting its demand that outgoing Prime Minister Giuseppe Conte lead any new coalition.
It said the talks would be at a standstill until the centre-left changed its attitude.
Just a few hours later, as key PD figures met at the party's headquarters in central Rome to discuss tactics, PD lawmaker Andrea Marcucci told journalists "the negotiations have resumed".
He said he was "optimistic" a deal could be reached in time.
- Trump endorsement -
The political crisis was triggered on August 8 when Matteo Salvini withdrew his far-right League party from the governing coalition with M5S and called for snap elections, looking to capitalise on his party's surge in opinion polls.
Mattarella has said that any new coalition must have an agreed platform that can pass through parliament, after months of political clashes between M5S and the League over several high-profile policies.
The PD was initially unwilling to have M5S ally Conte serve another term, preferring a complete shake-up of the cabinet.
It has criticised Conte for having accepted the anti-migrant dictates of Salvini, the outgoing hardline interior minister.
As the political wrangling continued, the 55-year old lawyer received the endorsement of US President Donald Trump.
"Starting to look good for the highly respected Prime Minister of the Italian Republic, Giuseppe Conte," Trump tweeted.
"Represented Italy powerfully at the G-7. Loves his Country greatly & works well with the USA. A very talented man who will hopefully remain Prime Minister!" he added.
Italian media said Conte had been working behind the scenes to help the M5S and PD bridge their differences.
The PD and M5S held a meeting on Tuesday afternoon which the centre-left party described as "very positive", and planned fresh talks on Wednesday morning.
The Movement's leader Luigi Di Maio said late Tuesday that should a deal be reached it would still have to be voted on by M5S members in an online poll that would take place before the end of next week.
"Only if the vote is positive will the M5S support the proposed government project," he said.
Political watchers have warned that the Movement's base may not be open to an alliance with the centre-left.
- 'Not afraid' -
All of Italy's main parties have been summoned to report back to Mattarella on Wednesday.
If the PD and M5S cannot reach a deal and form a solid majority, the president is expected to call an early election for November.
A return to the polls is expected to favour strongman Salvini, who has been openly mocking the M5S and PD's courtship.
"Who is afraid of Italians' votes? Not us," he said on Facebook, insisting an election was the only fair option.
The clock is ticking to ease the political turmoil, with Italy under pressure to approve a budget in the next few months.
If it fails to do so it could face an automatic rise in value-added tax that would hit the least well-off families the hardest and could plunge the eurozone's third-largest economy into recession.
The Milan stock market closed up more than 1.5 percent, suggesting investors still had hopes of a deal.