Italian opposition members of parliament have called for the sacking of Tourism Minister Stefano Stefani, who described Germans as hyper-nationalistic, blond beach invaders.
Stefani has not offered an apology for his remarks
Mr Stefani's comments led German Chancellor Gerhard Schroeder to cancel his planned holiday in Italy.
The diplomatic row between the two countries - which erupted last week when Italian Prime Minister Silvio Berlusconi compared a German member of the European Parliament to a concentration camp commander - is showing no signs of dying down.
The opposition motion calls for Mr Stefani's removal from office for the "gravity, inappropriateness and irresponsibility of
"These statements have done grave damage to Italy's
image," the motion said, adding that tourism had already been damaged and the effects could get worse.
As the motion was presented in Rome, the governor of the Italian region where Mr Schroeder would have stayed stepped up his demands for compensation.
"We intend to ask for political compensation for the serious
damage inflicted on our region," said Vito D'Ambrosio of the
Marche region on the Adriatic Sea.
He compared Mr Stefani's comments to a natural
The BBC's Jonathan Charles in Rome says Italian hoteliers are concerned about the financial consequences of the dispute.
Ten million Germans visit Italy each year - making it the second most popular holiday destination for Germans behind Spain. Tourism officials are worried that many will now stay away.
The general secretary of Mr Schroeder's Social Democrats announced on Thursday that he was boycotting Italy in favour of France for his summer holiday.
Mr Berlusconi responded to Mr Schroeder's move by saying he felt "sorry" for him.
Mr Stefani, meanwhile, who is a minister from the far-right Northern League, refused to apologise for his outspoken attack, though he said he would
gladly invite Mr Schroeder to his house on Lake Garda.
"I don't hold anything against the Germans. I had a German
wife for 20 years," he said.
"[But] on certain types of Germans I haven't changed my mind," he added.
Several top German ministers have demanded that Mr Stefani should leave office over his remarks.
An angry Schroeder says he will stay in Germany
Interior Minister Otto Schily, speaking before Mr Schroeder's decision was announced, implied that Germans might vote with their feet.
"The Italians must know that there is competition for German tourists," he said.
"Those who kick you in the shins and spit at you must not be surprised that that is not good publicity for their country."
The mass-circulation Bild newspaper printed a coupon on Thursday which readers could send to the Italian embassy demanding Mr Stefani's removal.
The BBC's Ray Furlong in Berlin says this is the worst moment yet in the crisis that has hit German-Italian relations after Mr Berlusconi's remarks.
Mr Schroeder's trip to the Adriatic resort of Pesaro had been due to start in mid-July.
He will now spend his holiday in his home town of Hanover.