Berlusconi resigns

Italy's president began meeting with political and parliamentary leaders on Sunday to facilitate discussions on forming a new government. The talks come a day after Silvio Berlusconi stepped down amid a growing economic crisis.

Berlusconi handed in his resignation to President Giorgio Napolitano on Saturday evening after parliament's lower chamber approved a new budget law intended to reverse a collapse of market confidence.

The law includes tax breaks to stimulate economic growth, the sale of state assets, a raise of the retirement age to 67 by 2026, and measures to increase labor market flexibility. Berlusconi made passage of the budget law a precondition for his resignation.

Demonstrators took to Rome's streets and flocked to Berlusconi's private residence, waving flags and shouting "clown" as the motorcade carrying the billionaire media tycoon entered the premises.

"I am deeply embittered," the 75-year-old said.

Napolitano was expected to meet with political leaders throughout the day and announce a new government in time for the opening of markets on Monday.

High public debt

Berlusconi's political support collapsed on Tuesday after he failed to secure a majority on a routine vote on spending. His resignation will allow the formation of a transitional government that will be tasked with trying to pull the country out of its debt crisis.

"Today the curtain falls on a long and painful phase of Italian political history," said Dario Franceschini of the main opposition Democratic Party. "The country wants to turn the page and start again."

Italy, the eurozone's third-largest economy, has the second-highest public debt after Greece, running at 120 percent of gross domestic product (GDP). The new law had been called for by the European Union as an attempt to prevent Italy needing a bailout that the bloc could not afford.

Possible opposition

Mario Monti, a former EU commissioner and respected economist, has been tipped as the most likely leader of the interim government.

However, there are already signs of opposition. Some in Berlusconi’s center-right PDL party said they are ready to accept a government led by Monti, while others have declared their deep opposition.

The daily newspaper Il Giornale - owned by the Berlusconi family's media empire - called on the public to "stop a Europe of technocrats," painting the anticipated new government presumed to be led by Monti as "a coup."

The PDL's main coalition partner, the Northern League, said it will go into opposition. It has warned that the new government will not have the necessary broad parliamentary support to pass major reforms.

"The convulsions of the center-right at the prospect of a government led by Mario Monti signal a danger: that a divided coalition may be tempted to unload its divisions on the country," the daily Corriere della Sera said.

Corruption trials and sex scandals

The media mogul and billionaire Berlusconi first came to power in 1994. His three terms as prime minister have been tainted by corruption trials and accusations that he used his political power to advance his business interests.

In addition, his last term has seen a number of sex scandals, including criminal charges over alleged payments for sex to a 17-year-old girl.

Berlusconi denies all accusations.

Author: Timothy Jones, Spencer Kimball (AP, Reuters, dpa, AFP)

Editor: Sean Sinico