Italy's president will begin discussions with political leaders Wednesday on forming a new government following the resignation of Prime Minister Giuseppe Conte.

Conte stepped down on Tuesday after divisions in the ruling coalition left him without a parliamentary majority but is hoping to return at the head of a strengthened government.

President Sergio Mattarella, the ultimate arbiter of Italian politics, asked Conte to stay on while he establishes if this is viable -- or if someone else should take over.

The head of state is set to meet the presidents of both parliamentary chambers before talks on Thursday and Friday with party leaders.

The turmoil comes at a crucial time for Italy, as it seeks to draft a 220-billion-euro ($267 billion) spending plan for European Union funds intended to help the country recover from the coronavirus crisis.

The pandemic has hit Italy hard, plunging the eurozone's third largest economy into deep recession and leaving more than 86,000 people dead.

The current ruling parties, including the populist Five Star Movement (M5S) and the centre-left Democratic Party (PD), are hoping to stay in office and avoid snap elections.

Opinion polls suggest that the opposition coalition, which includes Silvio Berlusconi's Forza Italia and Matteo Salvini's far-right League, would win power.

But forming a new government would mean working again with former premier Matteo Renzi's Italia Viva party, which sparked the current crisis by leaving the coalition in a row over the handling of the pandemic.

Conte, who cancelled a scheduled speech to the World Economic Forum Wednesday, said after his resignation that Italy required "a clear perspective and a government with a larger and safer majority".

-My resignation serves this possibility: the formation of a new government that can offer a prospect of national salvation- he wrote on Facebook on Tuesday.

However, he acknowledged that he himself -- a former law professor plucked from obscurity to lead a previous M5S-led government after the 2018 elections -- may not necessarily be at the helm.

-The only thing that really matters, regardless of who will be called to lead Italy, is that the Republic can raise its head again- he wrote.