Italy crisis: Silvio Berlusconi resigns as PM

Silvio Berlusconi has resigned as prime minister of Italy, after dominating the country's politics for 17 years.

President Giorgio Napolitano is likely to appoint technocrat Mario Monti as his successor.

Mr Berlusconi lost his majority amid an acute debt crisis that threatens the eurozone. He promised to go once MPs had approved new austerity measures.

Crowds celebrated outside the presidential palace, shouting "buffoon" as he entered.

The BBC's Alan Johnston in Rome says Mr Berlusconi's last journey as prime minister was an undignified one.

Police struggled to control a large, hostile crowd which booed and jeered as his convoy swept by, and after his resignation he left by a side exit to avoid the protesters.

He said he felt "embittered" after hearing the insults.

Mr Berlusconi is Italy's longest-serving post-war prime minister. His premiership has recently been marred by many scandals.

He is a consummate survivor, our correspondent says, but he was overwhelmed by the scale of the financial crisis which has engulfed Italy.

After losing his parliamentary majority on Tuesday, Mr Berlusconi promised to resign when austerity measures, demanded by the EU and designed to restore markets' confidence in the country's economy, were passed by both houses of parliament.

Members of the lower house voted 380-26 with two abstentions on Saturday, a day after the Senate approved the measures that have now been signed into law.

Sluggish growth

Mr Napolitano's spokesman Donato Marra said the president had invited the outgoing government to "remain in power in order to finish current business".

Consultations on forming a new government would begin on Sunday, he said.

Mr Napolitano is expected to formally ask Mr Monti or another candidate to form a government of technocrats.

Mr Monti, a well respected economist, is exactly the sort of man that the money markets would like to see take charge at this time of crisis, our correspondent says, and he has support in many quarters.

But there is significant opposition to him within the country, and a feeling that Italy's troubles are just too deep for a mere change of government to make any rapid, significant difference.

The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

• An increase in VAT, from 20% to 21%

• A freeze on public-sector salaries until 2014

• The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men

• Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions

• There will be a special tax on the energy sector

On Wednesday, the interest rate on 10-year Italian government bonds touched 7%, the rate at which Greece, Ireland and Portugal were forced to seek bailouts from the EU.

An EU team has begun work in Rome, monitoring how Italy plans to cut its crushing debt burden, 120% of annual economic output (GDP).

The Italian economy has grown at an average of 0.75% a year over the past 15 years.

Mr Berlusconi has been prime minister three times since he first took office in 1994. He has described himself as Italy's best head of government since the country was created nearly 150 years ago.

But he is currently involved in several trials for fraud, corruption and having sex with an under-age girl, and has attracted media attention for so-called "bunga-bunga" parties which young women were allegedly paid to attend.