Italian Prime Minister Silvio Berlusconi is set to resign Saturday after a new budget law was approved in parliament, making way for a transitional government that will try to steer the country out of a potential economic crisis.

Mr. Berlusconi, who has been in power for 10 of the past 17 years, said Tuesday that he would resign after lawmakers adopt a package of European-backed economic reforms. The Italian parliament approved the package in a vote on Saturday.

Mr. Berlusconi is expected to submit his resignation at a cabinet meeting later Saturday.

Italian President Giorgio Napolitano is widely expected to ask former European Union Commissioner Mario Monti to lead the new transitional government.

Analysts hope Monti, a well-respected economist, can bring a calming presence to the country as it struggles to thwart an economic crisis caused by a ballooning public debt. Italy's borrowing costs have increased to its highest level since it joined the common euro currency zone and are now close to the same seven percent levels that pushed Ireland, Portugal and Greece to seek bailout loans.

International leaders including U.S. President Barack Obama, French President Nicholas Sarkozy and the head of the International Monetary Fund, Christine Lagarde, have expressed hopes that a new government can be formed quickly. Though Monti has backing from the main opposition Democratic party and several smaller opposition groups, Mr. Berlusconi's allies remain split over who should replace the embattled leader.

Mr. Berlusconi came to power for the first time in 1994 and served three stints as prime minister. Each of his terms were tainted by corruption scandals and allegations that he used his power to help his business interests. The 75-year-old billionaire media mogul also faced a high-profile scandal during his current term involving allegations of involvement with a 17-year-old prostitute, charges he denied.