Prime Minister John Key says the Cabinet will decide within about two weeks whether there will be Maori seats on Auckland's super-city council.
ACT Party leader and Local Government Minister Rodney Hide says he will give up all of his ministerial portfolios if Maori seats are included.
Mr Hide's stance became public following the release of an email written by a National Party MP claiming the ACT leader had threatened pull the plug on the support agreement between the two parties.
However, Mr Hide has said that while he would step down if Maori seats are included in Auckland governance legislation, he would not renege on the confidence and supply agreement with National. He says he told Mr Key in June of his intentions.
Mr Key is also under pressure from the Government's other support partner, the Maori Party, for Maori seats to be included on the super-council.
He says dealing with the tensions between the parties is part of MMP politics, but says a complicating factor is that Mr Hide holds the ministerial portfolio on the issue in question.
Mr Key says the Cabinet will make a decision on the Maori seats on Monday or the following week.
Mr Key says he respects Mr Hide's view and principled approach and has been reassured there is no risk to the governing arrangements.
United Future leader Peter Dunne, whose party also has a support arrangement with National, says Mr Hide's stance is a new twist to party negotiations as differences are more usually talked through and resolved.
Mr Hide is also the Minister for Regulatory Reform and Associate Minister of Commerce.