0824 GMT February 20, 2020
The heightened political tensions in the heavily-indebted country – the eurozone's third largest economy – rattled financial markets, where yields rose on Italian government bonds, AFP reported.
Prime Minister Giuseppe Conte, who has held several rounds of talks to try to ease the crisis in the 14-month-old government, angrily called on Salvini to justify his move.
Salvini has clashed frequently in recent weeks with his fellow Deputy Prime Minister Luigi di Maio of the anti-establishment Five Star Movement (M5S) over a range of policies.
He upped the pressure Thursday, saying there was no longer a majority to support a government and calling for new elections.
"Let's go straight to parliament to say there is no longer a majority... and quickly go back to the voters," Salvini said.
The move sparked a crisis described by the left-wing newspaper La Repubblica as "a farce that makes no-one laugh".
Conte, who has held separate talks with Salvini and President Sergio Mattarella, went on the offensive, saying it was not for the firebrand interior minister to summon parliament.
He called on Salvini "to explain to the country and justify to the electorate, who believed in the possibility of change, the reasons that brought him to abruptly interrupt" the activities of government.
Both houses of parliament are currently on recess for the holidays and are not due back until September.
Long-rumbling tensions between the coalition's populist leaders have peaked in recent days, with a row over the financing of a multi-billion-euro high-speed train line between the Italian city of Turin and Lyon in neighboring France.
On financial markets, the yield on 10-year government bonds jumped to 1.8 percent from over 1.5 percent on Thursday while the spread between Italian and German bonds jumped to 233 basis points.
"This government has been over for a while," political analyst Stefano Folli told AFP.
"What's clear is that in a few months time we'll have a right-wing government, for the left is weak and the M5S is in crisis.
"It will be a hard-right one, born of a fairly explicit challenge to the European Union," he said.
The left vowed not to roll over, with former prime minister Paolo Gentiloni tweeting that Salvini was "asking for full powers to take us out of Europe. It will not happen".
An early election would benefit Salvini, with opinion polls putting his League party ahead, leaving open the possibility that it could govern in alliance with another, smaller far-right party, Fratelli d'Italia (Brothers of Italy).
It reflects a change in fortune for Italy's coalition partners since last year, when M5S took 32 percent of the vote at the general election, and the League 17 percent.
In the European elections in May this year, the League took the most votes in Italy with 34 percent against 17 percent for M5S.
Di Maio said his M5S party "is ready" to return to the polls.
Italian media has reported that Salvini, in earlier talks with Conte, set conditions for staying in the coalition – including the resignation of the transport, defense and economy ministers, who have resisted his projects and policies.
The opposition has also called on the government to resign, arguing it no longer has a workable majority in parliament.
But Mattarella, who has the sole power to dissolve parliament, insists there must be a government in place to finalize the budget, a first draft of which has to be submitted to EU authorities by the end of September.
To that end, he could name a government of technocrats and push elections back to February or March, although this would be unpopular with Italians.
The government is struggling to rein in its budget deficit and a mammoth debt mountain of more than 2.3 trillion euros.