Outgoing Italian PM Renzi does not fear democracy or early polls

The centre-left Democratic Party is not afraid of a snap election in the New Year and will meanwhile help head of state Sergio Mattarella solve Italy's political crisis, outgoing Premier Matteo Renzi said on Wednesday.

"We are not afraid of anything or anyone," Renzi told a meeting of the PD convened after a crushing defeat in Sunday's constitutional reforms referendum forced him to announce his resignation.

"If others want to go and vote, after the (January 24 electoral law) ruling by the Constitutional Court, let them speak out because we all have to act responsibly," Renzi said.

"The PD is not afraid of democracy or votes," he said.

The PD is the largest in parliament and must give Mattarella a hand in solving the government crisis "in the ways that the various parties identify," Renzi said.

The 41-year-old premier also said he was ready to hand over to a new party leader "with a hug and wishing them well".

Renzi then set off for Rome's Qurinale Palace to tender his formal resignation to Mattarella.

Renzi tweeted earlier that he would resign formally after the parliament passed Italy's 2017 budget on Wednesday, as Mattarella had requested.

Mattarella does not favour early elections until Italy has compatible electoral systems for both houses of parliament, although the two main opposition parties, the anti-establishment Five-Star Movement and the rightwing Northern League are pushing hard for early polls.

Italy's constitutional court will on January 24 rule on the legitimacy of the current electoral law, known as the Italicum, which only applies to the lower house of parliament.