Italian President Giorgio Napolitano has asked centre-left deputy leader Enrico Letta to form a new government, signalling the end of a damaging two-month vacuum since elections in the euro zone's third largest economy in January.
The prime minister designate is expected to quickly select a group of ministers, mixed between politicians and technocrats, under the guidance of Napolitano, whose own unprecedented re-election last weekend opened the way for an end to the crisis.
The new government led by Letta, a former Christian Democrat from the right wing of his Democratic Party (PD), could go to parliament for a vote of confidence by this weekend.
Formation of a government after two months of turbulent political impasse will send a signal that Italy might at last be ready to make a start on much-needed reforms.
Accepting his mandate, Letta said he was surprised by the nomination and felt the profound responsibility on his shoulders.
Italy faced a "difficult and fragile" situation which could not continue and the government must provide answers on jobs, poverty and the crisis facing small businesses in a deep recession, he said.
He added that European economic policies have been too focused on austerity instead of growth.
Napolitano's choice of Letta instead of veteran former Prime Minister Giuliano Amato, who was said to have been his original favourite, indicated he had plumped for a more political figure who reflects a generational change in Italian politics.
Letta, an urbane moderate who speaks fluent English, is 46 against Amato's 74 and is an elected member of parliament unlike the older, more experienced man.
He will be the second youngest prime minister in Italian history and as a staunch pro-European is likely to be welcomed by foreign governments and markets.
The new government will be backed primarily by Letta's centre-left and the centre-right of Silvio Berlusconi, which had hitherto failed to cut a deal following inconclusive elections in late February.
MARKET RELIEF
Investors have already reacted with relief to the prospect of an end to the intractable crisis, with Italy's borrowing costs on Wednesday tumbling to their lowest level since the start of European monetary union in 1999.
However, the country's problems are not over, with significant differences remaining between left and right over economic policy.
These were put sharply into focus even before Letta was chosen when Renato Brunetta, house leader for Berlusconi's PDL party, said they would only support a government committed to repealing a hated housing tax introduced by outgoing technocrat premier Mario Monti and paying it back.
The centre-left agrees only to a partial reduction of the tax and many economists say such a move would leave a gaping hole in Italy's public accounts.
But Napolitano, who reluctantly agreed to serve another term as president, has made clear that he will brook no more endless squabbling between the parties and has threatened to resign if they do not unite behind economic policies and important constitutional reforms.
Chief among these is the repeal of a dysfunctional electoral law which was largely responsible for the post election impasse.
Letta, the nephew of Berlusconi's long-time chief of staff Gianni Letta, is close to former party leader Pier Luigi Bersani, who resigned at the weekend after rebels sabotaged him in the voting for a new president.
Berlusconi's People of Freedom (PDL) party, Letta's PD and Monti's centrist Civic Choice movement had all said they would cooperate with whomever Napolitano chooses.
"Given the crisis the country finds itself in, the country needs a strong, a durable government that can make important decisions," Berlusconi said after meeting Napolitano