A nascent Five-Star-League government collapsed on Sunday after its Premier-designate Giuseppe Conte, a law professor, resigned when Mattarella vetoed the populists' choice of Finance Minister - the prominent eurosceptic economist Paolo Savona.
Already Italian politicians are manoeuvring for power after any caretaker administration. The 5-Stars, by contrast, got 32 percent.
Mr Mattarella "didn't give the centre-right the chance to form a government because we didn't have the votes, and now Mr Cottarelli arrives without any votes?"
The President sparked another political crisis in Rome when he refused to accept Conte's nomination for economy minister, 81-year-old Eurosceptic Paulo Savano.
"There's a bit of dip buying so I guess it's Italian investors buying, but we have to watch out for what other investors do as the day progresses, especially U.S. investors", said DZ Bank strategist Daniel Lenz.
He rejected that argument saying Italy isn't structurally weaker than Germany, but that the message needed to be underlined that "if we want to share currency, we need to behave in a different way". But this was short-lived.
The euro fell against the dollar on Tuesday as political uncertainty in Italy roiled markets. The euro lost its early gains, and was down 0.1 percent at a fresh 6-1/2 month low. The difference in the yield on Italian and German benchmark government bonds, an indicator of investors' concern about Italy, initially shrank from over 200 basis points to 190 on the morning of May 28th, but then returned to its earlier level.
Italy, the eurozone's third largest economy, has struggled since the 2007-2009 financial crisis under an enormous debt pile.
On Monday, after receiving the mandate to try to form a government, Cottarelli said his primary job was to guide Italy to a new election. "It's madness, and I ask the Italian people to stay close to us because I want to bring democracy back to this country", he told reporters.
Federica Mogherini says she's convinced that President Sergio Mattarella was serving the Italian people and the European Union by forcing the end of the proposed 5-Star Movement-League government.
"I hope that we can give the floor to Italians as soon as possible, but first we need to clear things up. Some things can not be done in the throes of anger", Salvini said.
In an interview with Radio Capital on Monday, Mr Salvini wondered aloud who would vote for Mr Cottarelli.
Assembling a Cabinet acceptable to both Mattarella and the populist partners foundered on League leader Matteo Salvini's insistence on a euroskeptic economy minister.
If the president were to continue to veto Savona, the risk is that the deal holding together the two rival parties, which won the most parliamentary seats in the March vote, would fall apart, making another election this year likely. The current purely proportional system produced a hung parliament two months ago, and polls suggest it could happen again.
The far-right League and the anti-establishment Five Star Movement have failed to set up shop in Rome since scoring the most votes in Italy's inconclusive elections almost three months ago.
The country is reeling from high unemployment rates and a generally sluggish economy. Many observers worry that they will increase their combined majority in a new election.
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