Matteo Renzi could become Italy's youngest prime minister ever

Italy's president may ask young centre-left leader Matteo Renzi to become its youngest ever prime minister this weekend after a party coup that forced Enrico Letta to resign as premier of the euro zone state struggling to pull out of recession.

Letta bowed out on Friday after the leadership of his Democratic Party (PD) forced him to step aside and make way for Renzi, 39, who is promising bold economic reforms and a government than can survive until 2018.

President Giorgio Napolitano expects to complete a round of consultations with parties in the evening and could summon Renzi, the PD secretary and current mayor of Florence, soon afterwards to form a government, sources in the party said.

After receiving a mandate from the president, Renzi will have to strike an accord with the small New Centre Right party, whose support the PD needs to command a majority in the parliament of the euro zone's third-largest economy.

The party, which split from scandal-plagued tycoon and ex-premier Silvio Berlusconi last year, has ruled out liberal social policies that Renzi has advocated, including gay civil unions, and wants a clear centre-right stamp on the government.

Renzi, whose PD is the largest party in parliament, would become the youngest leader in Italy's 163-year history as a united country, younger even - by two months - than Fascist dictator Benito Mussolini was when he took over in 1922.

But before Renzi can stake his claim on history and attempt to install Italy's 65th government since World War Two, he must overcome institutional rituals and much wheeling-and-dealing, a process likely to take several days.

The anti-establishment 5-Star Movement and the pro-devolution Northern League, both opposition groups, have abandoned the talks, saying they are an empty ritual whose outcome is already written.

But Berlusconi, the centre-right leader who was booted out of parliament last year after a conviction for tax fraud, was to accompany leaders of his Forza Italia party to meet the head of state in the afternoon.

After striking a deal with parliamentary allies, Renzi must name the members of his cabinet, swear them in, and then seek confidence votes in both houses of parliament.

He would become the third prime minister in a row nominated by Napolitano without having won an election. Letta was chosen to helm a right-left government after last year's deadlocked election, and Mario Monti took over for Berlusconi during a burgeoning euro zone debt crisis in 2011.

"If they think that this is democracy, we don't agree," said Vito Crimi, a leading member of the anti-establishment 5-Star Movement in the Senate.

MARKETS SEEM UNCONCERNED

Financial markets have seemed indifferent to Italy's latest political ruction and investor confidence in the country's ability pay off its debt is much improved from 2011.

On Friday, Moody's Investors Service lifted the country's sovereign rating outlook to stable from negative, after having slashed it by six notches to Baa2 from Aa2 during the debt crisis.

But that will not make the challenges facing Italy's next government any less significant. Gross domestic product has shrivelled by about 7 percent in the last five years and industrial output has fallen by 25 percent.

Italy's economy grew by a measly 0.1 percent in the fourth quarter of last year, data showed on Friday. It entered its worst post-war recession in mid-2011.

Hundreds of thousands of companies have gone out of business and joblessness has not reached such a high level since the 1970s. Italy's 2 trillion euros of public debt are equivalent to more than 130 percent of total economic output.

Until two weeks ago, Renzi repeatedly said that he had no ambition to snatch power without first winning an election, a move most Italians do not agree with, opinion polls have said.

Mounting pressure from unions and Italy's business lobby, which criticized the Letta government for not doing enough to help the country's struggling corporate landscape, prompted Renzi to change his mind, sources close to him have said.

A similar centre-left putsch in 1998 paved the way for a landslide centre-right election victory by Berlusconi less than three years later.

"If the new prime minister wants to govern and change the country, he'll have to do it without fear of losing the next elections," former premier Monti said in an interview with Il Foglio newspaper on Saturday.

Italian prime ministers are appointed by the president and do not have to win a direct election as premiers do in many other countries. But the succession of Italian prime ministers who have taken office without a mandate from voters has drawn criticism from opposition parties.