Italian President Giorgio Napolitano refused to sign a key government decree to increase the taxation powers of local authorities, dealing a blow to embattled Prime Minister Silvio Berlusconi.
Prime Minister designate Mario Monti will meet Italy's president on Wednesday to present a new government to face a crisis that has brought Italy to the brink of economic disaster and endangered the entire euro zone.
Italy's head of state dissolved parliament and opened the way to a February election, with doubts growing over whether outgoing Prime Minister Mario Monti will participate in what promises to be a bitter campaign.