Italian Prime Minister Silvio Berlusconi has resigned hours after the lower house of parliament gave final approval to a package of economic reforms aimed at avoiding a bailout of the eurozone's third-largest economy.
Lawmakers approved on Saturday the reforms that Berlusconi, who served as prime minister three times in the past 17 years, had set as a condition for quitting.
Berlusconi formally submitted his resignation to Italian President Giorgio Napolitano after announcing his exit at a cabinet meeting.
Former European Commissioner Mario Monti will now likely head a transitional government to try to steer the country out of its debt woes.
"Silvio Berlusconi's premiership has been very, very divisive indeed," Al Jazeera's Barbara Serra said, reporting from Rome where hundreds of Italians had gathered to show their approval of the new political changes.
"Even though Berlusconi has obviously made a massive imprint on Italy, no one here is really sad to see him go," Serra said.
While he became Italy's longest-serving post-war premier, Berlusconi's three stints as premier were tainted by corruption trials and accusations that he used his political power to help his business interests.
His last term has been marred by sex scandals, "bunga bunga" parties and criminal charges that he paid a 17-year-old girl to have sex - accusations he denies.
Italy is under intense pressure to quickly put in place a new and effective government, one that can push through even more painful reforms and austerity measures to deal with its staggering debts, which stand at 1.9 trillion euros ($2.6 trillion), or a huge 120 per cent of economic output.
The country came close to disaster this week after yields on 10-year bonds soared over 7.6 per cent, the kind of level which forced Ireland, Portugal and Greece to seek an international bailout.
As the eurozone's third-largest economy, an Italian default could tear apart the coalition of 17 countries that use the euro as a common currency and deal a strong blow to the economies of Europe and the United States, both trying to avoid recessions.
President Napolitano is expected to ask Monti to try to form a new administration to face a widening financial crisis.
"The name that everyone is talking about is Mario Monti, an economist, former commissioner of the European Union - he held two posts there for internal markets and competition," our correspondent said.
"So [he is] definitely the right person certainly in the eyes of eurozone leaders to try and lead Italy out of the financial mess it's in right now.
"The question is: Will Mario Monti have the backing ... of enough politicians to be able to push through the changes to Italian economics that he's going to have to? And right now that is quite uncertain."
With the next elections not due until 2013, a technocrat government could have about 18 months to pass painful economic reforms but will need to secure the backing of a majority in parliament and could fall before then.