Italian Prime Minister Silvio Berlusconi on Saturday resigned and indicated he would give conditional support to the formation of a new government led by former EU commissioner, Mario Monti, dpa reported.
Berlusconi tendered his resignation to Italian President Giorgio Napolitano, who accepted the request, the president's office said in a statement. The move came after parliament gave final approval to austerity measures demanded by the European Union.
The announcement was greeted by scenes of jubilation in Rome with people dancing, singing and waving Italian flags in front of the Napolitano's Qurinale Palace offices.
Earlier, dozens of bystanders shouted "Buffone! Buffone! (Clown! Clown!)" at Berlusconi as he left his residence following a meeting with aides, and in a motorcade made this his way through central Rome to the quirinale.
"It is an end of an era," said Dario Franceschini of the main centre-left opposition Democractic Party, referring to the possible exit of Berlusconi from Italy's political scene, one which the media magnate-turned politician has dominated for the past 17 years.
Berlusconi had promised earlier this week he would resign once parliament approved the measures - a process that was completed Saturday with the vote in the lower-house Chamber of Deputies.
The austerity measures went through with 380 votes versus 26 nays. There were two abstentions.
The measures - which include tax breaks to stimulate growth; the sale of state assets; raising the pension age to 67 by 2026; and greater labour market flexibility - were approved by the Senate on Friday.
Entering the Chamber of Deputies, possibly for the last time as premier, the 75-year-old Berlusconi received a standing ovation from members of his conservative coalition who began chanting: "Silvio, Silvio!"
"The Berlusconi government has done everything possible to fight against the attacks (on Italy)," said Fabrizio Cicchito, chief whip in the Chamber of Deputies for the premier's People of Freedom (PDL) party.
"Unfortunately it (the government) came up against a solid block: those complex economic and financial interests that play a decisive game in democracies and for the survival of governments," Cicchito said.
He was apparently referring to market speculators who have pressured Italy over its debt.
But several jeers went up from the opposition benches against Berlusconi.
"Italy awaits (the premier's departure)," Dario Franceschini, chief whip of the main centre-left opposition Democratic Party, said.
"We now have to address the economic reforms in a phase of transition," Franceschini, whose party has come out in favour of a technocrat-led unity government, added.
Earlier Saturday, Berlusconi held two hours of talks with former European Union commissioner Mario Monti, who is expected to be tasked by Napolitano with forming a new government.
The content of the talks has not been disclosed.
But Berlusconi's party in a statement issued minutes before the premier's resignation became official said it had approved a proposal by Berlusconi to inform President Giorgio Napolitano that the party would support an eventual mandate given by the president to Monti to form a "technical government".
The People of Freedom Party (PDL) did not immediately provide further details.
The ruling conservative coalition has been split over whether to push for new elections or to support a unity government that includes the centre-left opposition.
Berlusconi had initially favoured a snap poll, and was said to pushing PDL Secretary Angelino Alfano as prime minister, saying he would not stand for relection,
But opposition figures - including former prime minister and leader in the Democratic Party, Massimo D'Alema - are opposed to Alfano becoming prime minister, because they see him as Berlusconi's hand-picked successor.
Such a government "would not be any stronger than the one led by Berlusconi," D'Alema said Saturday, adding that any new government should have solid credibility to calm the markets and satisfy the European Union.
Napolitano is in favour of appointing a new government, and is now expected to hand Monti a mandate as premier - a move analysts say would be welcomed by financial markets, which reopen on Monday.
Before meeting Berlusconi, Monti on Saturday also held talks with European Central Bank President Mario Draghi, increasing media speculation in the Italian media that Monti will be named as new prime minister.
Markets reacted favourably to speculation about a Monti-led government on Friday. The benchmark 10-year yields on Italian government bonds fell 27 basis points to 6.7 per cent, below the peak 7 per cent reached on Wednesday.