Matteo Salvini has threatened chaos and mass protests unless snap elections are called as soon as September, while Five Star Movement leader Luigi Di Maio called on parliament to "impeach President Mattarella".
Both Salvini and Di Maio had staunchly backed Savona, and pressed Mattarella regarding the proposed government team in separate meetings with the head of state earlier on Sunday afternoon.
His coalition partner and leader of the Five Star Movement, Luigi Di Maio, echoed a similar sentiment, noting that apparently only goose-stepping European Union cheerleaders are qualified to serve as minister of economy. He added: "we're not a free country" but have "limited sovereignty".
"I have given up my mandate to form the government of change", said lawyer and political novice Giuseppe Conte, 53, plunging the country into a political crisis almost three months after March's inconclusive general election.
"Good luck to anyone" who next gets tapped by Mattarella to be premier-designate, Giuseppe Conte, a law professor at the University of Florence, told reporter.More news: Liverpool fans stranded by Ukraine flight problems
Spot gold was barely changed at US$1.344.7 an ounce.
The post-election coalition had spent days drawing up a pact aimed at ending a stalemate following an inconclusive March vote and now claims President Mattarella has abused the power of his office.
A government led by Mr Cottarelli "is born dead", said Five Star proponent Manlio Di Stefano.
Instead, the president has nominated Carlo Cottarelli, a pro-EU, International Monetary Fund (IMF) veteran, to head a caretaker government which may only last through August after which elections will likely be held.
"I asked for the (economy) ministry an authoritative person from the parliamentary majority who is consistent with the government programme... who isn't seen as a supporter of a line that could probably, or even inevitably, provoke Italy's exit from the euro", Mattarella said. Immediately giving him a thumbs-down were the 5-Stars and the League, whose lawmakers together have the votes to sink his government. In recent weeks, as it seemed inevitable that M5S and the League would form Western Europe's first populist, anti-establishment government, the prices of Italian bonds sank, rattling investors everywhere - Italy oversees the world's fourth-largest debt market. "The two populist parties will blame the "establishment" for denying them the right to govern", Piccoli said.More news: Government set to eradicate mycoplasma bovis
As a "spending commissioner", Mr Cottarelli used a 72-page document to recommend €32bn worth of government cuts - including a squeeze on pensions.
"The next elections will be a plebiscite - the population and real life against old political castes and the "lords of the spread", Salvini added. In Brussels, too, the initial relief at dodging the bullet of a Euro-skeptic finance minister quickly gave way to concern that Mr. Mattarella's move had fueled anti-European feeling in Italy.
Mr Mattarella said he feared a new government with Mr Savona as economy minister could endanger Italy's membership in the eurozone.
Above: Over the course of the past trading month, the Euro is the worst performing major currency.
Elsewhere, Asian stock markets were mostly lower, with Japan's Nikkei down 0.6% as the yen strengthened against the dollar. "And they portend concrete risks for the savings of our fellow citizens and for Italian families".More news: Fairmont in Jasper says royal newlyweds are not booked for honeymoon
Demanding an immediate ballot, Salvini told followers on Facebook: "It won't be an election, it will be a referendum between Italy and those on the outside who want us to be a servile, enslaved nation on our knees". "I would be surprised if the situation in Italy and the significance of the ECB was not going to be reflected in the many speeches to be delivered by ECB central bankers today", says Leuchtmann.