By Steve Scherer
ROME (Reuters) - Italian Foreign Minister Giulio Terzi resigned on Tuesday over his government's decision to return two marines to India to face trial for the murder of local fishermen while on anti-piracy duty.
Terzi said he was stepping down to protect the "honor of the country, of the armed forces, and Italian diplomacy", during testimony to the lower house of parliament, drawing loud applause from lawmakers.
"I can no longer be part of this government and I announce my resignation," he said. "My reservations about sending the marines back to India were not listened to."
The marines, Salvatore Girone and Massimiliano Latorre, are facing trial in India over the shooting dead of two fishermen off the southern state of Kerala in February 2012 when they were assigned to protect an Italian commercial tanker from pirates.
They said they fired warning shots at a boat they believed to be a pirate vessel.
Since the incident, India and Italy have been embroiled in an escalating row at a time when Rome is trying to secure a major deal to sell helicopters to the Indian government.
The marines were allowed home for Christmas, and then again to vote in the Italian elections in February, on condition they returned to India.
On March 11, the outgoing technocrat government of Mario Monti said it would not send the marines back because Indian courts did not have jurisdiction over the incident, which Rome said occurred in international waters.
But Italy reversed its position last week after India prevented the Italian ambassador from leaving the country.
Latorre and Girone returned to New Delhi on Friday in what defense forces chief Admiral Luigi Binelli Mantelli called a "farce".
The two men themselves wrote a letter to lawmakers saying their return to India was a tragedy.
The confused handling of the dispute has been a black mark on Monti's brief, 17-month government, and has led to accusations that it has made Italy appear diplomatically weak.
The marines' anti-piracy duty was conducted under the umbrella of a U.N. resolution to safeguard shipping from repeated pirate attacks.
Terzi's decision to quit was a reversal of the sentiments he expressed in an interview he gave to a newspaper last Friday in which he said he "didn't see a reason" to step down.
Monti said he was "astonished" by the resignation because he had seen his foreign minister on Tuesday morning and he had not been told of the impending announcement.
He said Terzi's opinion that the marines should not have been returned to India "is not shared by the government" and that he would address parliament on Wednesday "on the whole affair".
Later, President Giorgio Napolitano named Monti to serve as interim foreign minister.
Italy has been in a political limbo since elections last month, which gave no political group a working majority in parliament. But Monti's government, now in a caretaker capacity, is unlikely to remain in power for more than a few weeks.
Defense Minister Giampaolo Di Paola, who spoke immediately after Terzi, rejected his gesture.
"It would be easy for me to resign today, leaving a seat open that will be filled by another minister soon anyway," Di Paola said. "But I won't abandon a ship in difficulty, with Massimiliano and Salvatore on board, until the last day of the war."
Several lawmakers, led by Silvio Berlusconi's People of Freedom (PDL) party, accused Monti of mishandling of the affair.
"The incredible conflict within the government took place to the detriment of our marines ... and it demonstrates once again the political inadequacy of Monti," said Deborah Bergamini, a PDL lawmaker.
(Additional reporting by Naomi O'Leary; Editing by Barry Moody and Michael Roddy)