Italy begins the process of forming a new government Sunday, with economist Mario Monti the front-runner to succeed Silvio Berlusconi, who resigned as prime minister Saturday under criticism of his handling of the country's worsening debit crisis.

Italian president Giorgio Napolitano is due to meet with political leaders during the day to discuss the naming of a transitional prime minister to lead the country until the next elections, due by 2013. Economist and former European Union Commissioner Mario Monti has received support for the top job from major opposition parties and some members of Mr. Berlusconi's ruling center-right PDL party.

Financial markets have responded positively to Monti's emergence as the likely new prime minister, with Italian borrowing costs easing from record highs reached earlier in the week. Italian leaders were hoping to have a new government in place before financial markets open on Monday to reassure investors that Italy's political system is stabilizing.

Italy's next government faces the challenge of implementing a major austerity package approved by parliament in the past week to reduce the country's huge public debt. EU leaders have been pressuring Italy to cut public spending to avoid becoming the latest euro zone member to request an EU bailout. EU officials worry that the Italian economy is too big be rescued and fear that its demise would be a major blow to the euro.

Mr. Berlusconi submitted his resignation to Mr. Napolitano late Saturday, hours after parliament gave final approval to the austerity package. The unpopular prime minister lost his parliamentary majority on Tuesday and pledged to resign as soon as lawmakers approved the reforms. Mr. Berlusconi had gradually lost the support of his governing coalition as Italy's debt crisis worsened while he faced sex scandals and legal troubles.

The 75-year old outgoing leader has denied any wrongdoing.

Thousands of Italians opposed to Mr. Berlusconi gathered in the streets of Rome to celebrate his resignation, many cheering and shouting “buffoon!” The media tycoon served as prime minister for 10 of the past 17 years, winning his first of three terms in office in 1994.