Tunisia's prime minister announced his resignation Tuesday following a failed effort to form a technocratic government to see the country out of its political crisis.
The resignation is expected to further deepen the country's political instability, which earlier Tuesday prompted an international ratings agency to downgrade the government's credit rating.
Tunisians overthrew a dictator in January 2011, sparking the Arab Spring revolutions. A moderate Islamist party, Ennahda, won subsequent elections in the country of 10 million, and it has since struggled to govern in a coalition alongside two secular parties.
After the assassination of a leftist opposition politician on Feb. 6 set off riots across the country, Prime Minister Hamadi Jebali offered to dissolve the fractious governing coalition and put together a new government of technocrats — a move welcomed by the opposition.
But his own party, Ennahda, rejected his initiative, insisting that the country still needed a government of politicians. The rejection indicated that there not only divisions among the various parties in Tunisia but also within Ennahda.
Jebali announced he'd quit after a meeting with President Moncef Marzouki, describing the move as what's best for the country.
"I promised if my initiative did not succeed I would resign as head of the government, and this is what I am doing following my meeting with the president," he said at the presidential palace. "Today there is a great disappointment among the people and we must regain their trust and this resignation is a first step."
The resignation came the same day that international ratings agency Standard & Poor's downgraded the Tunisian government's credit rating over political instability, a blow to the North African nation's already struggling economy.
Ennahda's leader, Rachid Ghannouchi had put forward his own proposal Monday for a mixed government of politicians and technocrats and had said there was a consensus among political parties for Jebali to remain prime minister.
Jebali did not rule out accepting if he was charged by the president once more to form a new government, but he said that any new cabinet he would lead must be free from partisan haggling, inclusive of all political forces and charged primarily with holding new elections.
Tunisia's economy, which relies heavily on exports to Europe as well as tourism, has been battered by the violence in the country and financial crises facing many of its European trading partners.
Unemployment is around 18 percent and the people have been stung by a 10 percent inflation rate that has sent prices skyrocketing.
Tunisia's economy contracted 1.8 percent in 2011 and saw a sluggish 2.4 percent growth in 2012. S&P said the current instability suggests growth will not recover in 2013 either.
"We expect lower tourism receipts, combined with a widening trade deficit, to result in current account deficits that will remain in excess of 5 percent of GDP through 2016," the ratings agency's statement said. "We anticipate that Tunisia's economic recovery will be slow, particularly given the weak economic conditions in the EU."
The agency, which downgraded Tunisia's rating from BB to BB-, said recovery and investor confidence had been damaged by the pervasive instability as political parties have haggled over the shape of the government.
The move, the third such downgrade since the revolution, makes it harder for Tunisia to borrow on international markets and decreases foreign confidence in Tunisia's economy.
Associated Press writer Paul Schemm contributed to this article from Rabat, Morocco.