Italian president asks Renzi to form government

Italy's President Giorgio Napolitano has asked Matteo Renzi, the mayor of Florence, to form a new government.

It follows the resignation on Friday of PM Enrico Letta after he was ousted in a vote called by Mr Renzi at a meeting of their centre-left Democratic Party.

The party had accused Mr Letta of failing to tackle the ailing economy.

Mr Renzi, who has never been elected as MP, must now negotiate a deal with Mr Letta's former coalition partners and could be sworn in on Thursday.

At 39, he would become Italy's youngest ever prime minister.

In another development on Monday, Italian government borrowing costs dropped to their lowest rates for almost eight years. The yield on ten-year bonds fell to 3.64%, seen as an apparent nod from the markets towards Mr Renzi's plans for economic reform.

The EU's economic chief Olli Rehn said he was confident Italy's political transition would be smooth and that the new government would continue to pursue economic reforms.

'Unemployment and despair'

As he emerged from talks with President Napolitano on Monday morning, Mr Renzi - the Democratic Party leader - talked of his commitment and determination and the need for urgency on reform.

"The most pressing emergency, which concerns my generation and others, is the emergency of labour, of unemployment and of despair," Mr Renzi told reporters.

Constitutional changes would be put forward by the end of February, labour reforms by March and improvements to bureaucracy the following month.

Italy has a 41% rate of unemployment among 15-24 year-olds and an overall rate of 12.7%.

Democratic Party colleague Maria Elena Boschi said it would take several days to form a new administration.

Mr Renzi's initial priority will be to secure the support of the small New Centre Right (NCD) party in order to command a parliamentary majority and start cabinet building.

Mr Renzi arrived 10 minutes early for his talks with President Napolitano

Enrico Letta could not continue as PM after his party voted with a majority for a new government

Once he has formed a government, Mr Renzi will have to return to the president for his nomination to be confirmed and will then be sworn into office.

In order to win the support of both houses of parliament, Mr Renzi will need the backing of senators and deputies in both the NCD and the centrist Civic Choice, the former party of ex-PM Mario Monti, as well as other smaller parties.

An 'outsider'

Angelino Alfano, NCD's leader, has so far given a guarded response to Mr Renzi's plans.

He warned that the coalition remaining intact was "not a given" and told his party supporters he would demand promises from Mr Renzi before joining the new government.

"We are decisive for the creation of the new government. If we say no to this government, it won't come to life," he said. Italian media report that the two men have been in regular contact by text message over the weekend.

The mayor of Florence has never been elected to parliament or served in government before and is viewed by many as an outsider.

But the BBC's Alan Johnston in Rome says Italy is desperate for political change and Mr Renzi's youth and dynamism, and his talk of the need for sweeping reform, have propelled him to the centre of the national stage.