"In the absence of confidence, the government would resign immediately and its main function would be the management of ordinary affairs until elections are held after the month of August", said Cottarelli.
Cottarelli will struggle to gain the approval of parliament with Five Star and the League commanding a majority in both houses - the parties are likely to oppose any potential government he can put together in a parliamentary vote.
President Sergio Mattarella had vetoed the parties' choice of a eurosceptic as economy minister, prompting the 5-Star Movement and far-right League party to accuse him of betraying voters and to drop their plan to take power.
Al Jazeera's Jonah Hull reports.
In a terse comment to reporters after he relinquished the presidential mandate, Conte said he "gave the maximum effort, attention, to carry out this task".
"What a bad day for Italy and for democracy", Salvini said in a Facebook post on Sunday, following Mattarella's decision to veto Paolo Savona's nomination for the post of economy minister.
After lengthy negotiations, the two parties joined forces to create a collective majority in parliament and form a new government. "But someone (under pressure from whom?) said no to us", Salvini wrote in a Facebook post.
At first, markets seemed more appreciative of Mr. Mattarella's rejection of the populist government, but they then fell sharply, with stocks and bonds falling as investors digested the increased uncertainty.
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Mattarella said he was considering political party leaders' request for another election and would announce his next move "in the next hours". Nor is it that unusual for Italy to endure a delay of nearly three months since the general elections before the recent formation of its new government; after all the country has been run by a caretaker administration since December 2016. League leader Salvini seethed as he told followers, "We are not a free country, we have limited sovereignty". The president's office has declined to comment.
Lega supported the M5S demands for resignation of Mattarella.
"The uncertainty over our position has alarmed investors and savers both in Italy and overseas", Mattarella said, adding: "Membership of the euro is a fundamental choice".
Rome is burning. Italy's new populist government went up in flames only days before it was to be sworn in.
"This burns away resources and the savings of companies and prefigures risks for Italian families and citizens, including for mortgages".
"The uncertainty over our position has alarmed investors and savers both in Italy and overseas", he said, adding: "Membership of the euro is a fundamental choice".
"I am absolutely pro-European and I believe that Italy is connected, must have a connection with Europe for our future", said Irene Teramo, a shopper at a street market in Rome, who supported the president's decision.
With the prospect of elections possibly looming in a few weeks or months, Salvini might see a boost in what already has been steadily growing popularity, said political analyst Maurizio Molinari, who is La Stampa newspaper's editor-in-chief.
"The next elections will be a plebiscite, the people and real life against the old castes and the Lords of the Spread", Salvini said, referring to financial speculators, in a statement issued by his League.