Italian Prime Minister Silvio Berlusconi rejected calls for his resignation today, telling deputies on the eve of a key confidence vote that political instability would throw Italy into financial turmoil.

"There is no alternative to this government," the 75-year-old premier said in a speech that was applauded by his centre-right allies but boycotted by lawmakers from the centre-left in a rare sign of defiance.

"We want to continue working for the good of families and businesses even though a campaign of unprecedented violence has been launched against us by an opposition that is united only by its anti-Berlusconism," he said.

"I am here and with me I have a politically cohesive majority, apart from some incidents in parliament," he added, referring to the coalition's defeat on Tuesday in an important technical vote.

It was that embarrassing loss that led Berlusconi to address parliament.

"Our task and our duty is to defend Italy from the economic crisis," he added.

"Early elections would not solve the problems we have.

"A crisis now would mean victory for the party of decline, catastrophe and speculation that has been active for months in Europe and Italy."

Opposition lawmakers boycotted Berlusconi's speech but have said they will take part in a confidence vote on his government on Friday.

"Like Nero did while Rome burnt, Berlusconi will be playing and singing on his own," said Antonio Di Pietro, a former anti-corruption judge turned fierce Berlusconi critic. He heads up the small Italy of Values opposition party.

Berlusconi's popularity is at an all-time low, according to the latest polls.

He is a defendant in three trials for bribery, tax fraud, abuse of power and paying for sex with a 17-year-old girl -- and at the centre of an array of other sex scandals that have dominated headlines in Italy for months.

Former Berlusconi allies such as ex-economic development minister Claudio Scajola have begun voicing their discontent -- and there have been rumours for months as to where Finance Minister Giulio Tremonti's allegiances lie.

Political uncertainty in Italy and its effect on long-term economic policymaking was cited as a key factor for the recent downgrades of its sovereign debt by ratings agencies Standard & Poor's, Fitch and Moody's.

On the streets meanwhile, a protest movement similar to the "Indignants" in Spain and "Occupy Wall Street" in the United States has been taking shape.

Organisers have said they are expecting tens of thousands to turn out for a rally on Saturday.

Some commentators saw Tuesday's vote defeat as a key step in the decline of the billionaire tycoon's political career -- which began in the early 1990s when he entered politics with a party called Forza Italia (Go Italy).

The government was defeated by one vote when it tried to pass the 2010 state balance sheet, creating an unprecedented problem. It cannot approve the country's upcoming budget until the accounts for the previous year have been ratified.

The vote is now set to be held on Friday along with the confidence vote.

Some commentators think the chances of a general election before the end of the government's mandate in 2013 are now higher than ever.

Others however argue that it is too early to dismiss the canny Berlusconi.

"What is the probability that Berlusconi will fall tomorrow with a clear-cut vote? Very low. In practice, zero," said Stefano Folli, a columnist for business daily Il Sole 24 Ore.

"And yet few people think that winning the confidence vote will guarantee him smooth sailing," he added.

"The prime minister's real problems are the ones that existed before his visit to parliament and will continue to exist after it."