Rome: Italy’s president raced to appoint an emergency government on Sunday to face a crisis endangering the whole euro zone and replace Silvio Berlusconi who resigned as prime minister to the humiliating jeers of thousands of protesters.

Just a few hours after central Rome echoed with street parties celebrating Berlusconi’s departure, President Giorgio Napolitano began a rapid round of meetings with political parties at his hilltop palace.

Italian President Giorgio Napolitano (R) speaks with upper house president Renato Schifani at the Quirinale palace in Rome 13 November 2011. Reuters.

Monti will push through reforms agreed by Berlusconi with euro zone leaders to cut Italy’s massive debt and revive a chronically stagnant economy.

Italy’s political turmoil, centred around the flamboyant and scandal-plagued figure of Berlusconi, has brought the euro zone’s third largest economy to the brink of disaster and all eyes will be on market reaction on Monday.

“See what a beautiful day it is?" Monti said to reporters as he left his hotel on a crisp, clear day to go to church and then to his Senate office to continue work on forming the government.

Sunday newspapers termed Berlusconi’s departure the end of an era and spoke of the irony of how a media magnate famed for his skills of communicating with the public was seen off by jeering crowds.

Turin’s La Stampa called it “a sad exit from the stage," noting how he was forced to leave the presidential palace secretly via a side exit on Saturday night after handing in his resignation because a crowd shouting insults including “clown, clown" made it dangerous for him to exit by the front gate.

Cheers and champagne

Cheers erupted when they heard he had resigned. People sang, danced, broke open bottles of champagne, and an impromptu orchestra near the palace played the Hallelujah chorus from Handel’s Messiah. There were also celebrations in Milan and the central city of Bologna.

Some protesters threw coins at Berlusconi’s car in a gesture reminiscent of the departure into exile of disgraced Socialist Prime Minister Bettino Craxi in 1993, often seen as his political mentor.

Berlusconi, one of Italy’s richest men, has dominated the country since bursting onto the political scene the following year, filling the vacuum on the right created by a massive corruption scandal that swept away the old order.

Opposition newspapers hailed it as “Liberation Day" while pro-Berlusconi dailies such as Libero warned Italians to “watch your wallets" because a Monti government would impose a host of new taxes.

Following weeks of political uncertainty and growing calls from international partners for action to control its debt, Italy’s borrowing costs soared to unmanageable levels last week, threatening a Europe-wide financial meltdown.

Monti met European Central Bank president Mario Draghi and politicians from various parties on Saturday as preparations for a transition began even before Berlusconi stepped down.

Broad backing, some conditional

Monti has received the backing of the main opposition groups and the conditional acceptance of Berlusconi’s centre-right PDL after objections were dropped by several factions.

But analysts believe he will face an uphill battle with strong public and political opposition to some of the tough austerity measures he will need to implement to satisfy markets and euro zone leaders.

The next elections are not due until 2013 but there are wide predictions that Monti will not last until then but make way for polls once he carries through the reforms promised to Europe.

Italy came close to a full scale financial emergency last week after yields on 10-year bonds soared over 7.6%, levels which forced Ireland, Portugal and Greece to seek an international bailout.

With a public debt of more than 120% of gross domestic product and more than a decade of anaemic economic growth behind it, Italy is at the heart of the euro zone debt crisis and would be too big for the bloc to bail out.

Financial markets have responded positively to the prospect of a Monti government and as prospects of Berlusconi going became firmer last week, yields dropped below the critical 7% level.

It now falls to Berlusconi’s successor to try to reassure markets that a new government will be able to control spending and pass the kind of reforms to pensions, public service and labour markets that his government was unable to implement.

A tough negotiator with a record of taking on powerful corporate interests as European Competition Commissioner, Monti will have to navigate treacherous political waters.

On the left, reforms such as an increase in the pension age or easier hiring and firing rules could arouse strong opposition from unions.

But the threat could be at least as great from the centre-right with Berlusconi’s old Northern League coalition partners declaring they will oppose a Monti-led government and many in Berlusconi’s PDL party also harbouring deep reservations. The League adamantly opposes pension reform that would hit older voters who are among its key supporters.