Members of Silvio Berlusconi’s party have defied him by calling on MPs to back the Italian coalition government in a confidence vote.
Angelino Alfano, Silvio Berlusconi’s deputy and secretary of People of Freedom, urged the party to unite behind PM Enrico Letta on Wednesday.
Earlier, Silvio Berlusconi had ordered his ministers to leave the government, provoking its probable collapse.
But amid signs it would survive, Italian markets jumped on Tuesday.
The blue-chip stock index rose 2.5%, Reuters reports.
Investors also showed greater confidence in Italian bonds, with the interest rate paid to hold 10-year government debt falling as a result.
Silvio Berlusconi had threatened to topple the government, following moves to expel him from the Senate after his conviction for tax fraud.
However, Angelino Alfano, Silvio Berlusconi’s protégé, said on Tuesday: “I am firmly convinced that our party as a whole should vote confidence in Letta tomorrow.”
Angelino Alfano spoke after similar calls by other People of Freedom politicians such as Carlo Giovanardi, a senator and former minister, who said he could muster enough party support to ensure Enrico Letta wins the confidence vote.
Fabrizio Cicchitto, a senior People of Freedom MP, said: “Making the government fall would be a mistake.”
The crisis erupted when Silvio Berlusconi, a three-time prime minister and media tycoon who became engulfed in legal action, attacked the government over a rise in VAT (sales tax).
But Enrico Letta, from the centre-left Democratic Party, accused him of using the VAT issue as an “alibi” for his own personal concerns.
A committee of the Senate is due to decide on Berlusconi’s expulsion this week after the supreme court recently upheld his conviction for tax fraud.
Enrico Letta’s cross-party alliance was formed in April after two months of political deadlock following an inconclusive election. It was approved by 453 votes to 153.
Enrico Letta vowed to turn the recession-hit economy, the third-largest in the eurozone, around within 18 months or “face the consequences”.