Enrico Letta set to become Italy's prime minister

Italy took a big step towards ending two months of political paralysis on Wednesday as Enrico Letta, the deputy leader of the centre-left Democratic party (PD), was named prime minister designate and tasked with forming a broad coalition government involving Silvio Berlusconi's centre-right party.

Speaking after a meeting with the newly re-elected president, Giorgio Napolitano, Letta said he would endeavour to muster enough support for a "government of service to the country" that would prioritise the economic struggles of ordinary Italians and move away from an EU-led focus on austerity policies he said were "no longer sufficient".

He also said it would focus on constitutional reforms, including a new electoral law, which he hoped would enable "a different kind of Italian politics to emerge" from a period that had robbed the ruling class of "all its credibility".

Voters have watched incredulously since February's inconclusive parliamentary elections as politicians bickered while the problems of the recession-mired country - the eurozone's third largest economy - remained acute.

The vote produced a gridlocked parliament in which the PD had control of one house but not the other, prompting it to seek support from Beppe Grillo's anti-establishment Five Star Movement (M5S). Although that failed, the PD under then-leader Pier Luigi Bersani refused to accept Berlusconi's overtures for a grand coalition along the lines of the government now being sought by Napolitano and Letta.

After a fiasco of a presidential election, Bersani resigned. The reins have now been placed firmly in the hands of his deputy.

"The situation is very difficult, fragile, unprecedented," said Letta on Wednesday. "The elections did not create a majority ... The country is waiting for a government. We all know this is a situation that cannot go on. Therefore I have accepted this mandate, this call to responsibility."

Letta, a founding member and moderate of the PD who has experience at both domestic and European level, said he would start talks with political parties on Thursday and would hope to return to Napolitano as soon as possible with the details of a possible government. Any prospective coalition would still have to be voted on in parliament, which could happen early next week.

Although since February such an outcome has proved elusive, the 87-year-old president made it clear in an emotional speech on Monday that his decision to stand for an unprecedented second seven-year term - a crucial step in resolving the stalemate - was dependent on squabbling politicians behaving themselves.

"This is the only possible solution," he said, calling for a broad coalition and responsible negotiations between parties. Letta's ability to forge some kind of agreement with the centre-right is thought to be enhanced by the fact that his uncle, Gianni Letta, is Berlusconi's long-term right-hand man.

However, the challenge of extracting a ceasefire from bitter rivals is daunting, and any government that is formed may not last long. Many in Letta's own party remain vehemently opposed to any form of deal with Berlusconi's Freedom People (PdL) party.

In an early sign that negotiations between the PD and the centre-right might not run smoothly, Letta was forced to state that he would not be forming "a government ... at all costs" after the PdL set out a series of demands in return for its support. "[The government] will be born in the right conditions," said Letta.

If he manages to form a government, bespectacled Letta would, at 46, be Italy's youngest prime minister since Giovanni Goria in 1987, and one of the youngest in Europe. After an election in which a desire to change the "old politics" - and politicians - was a big issue, Napolitano appeared to have acknowledged a desire for relatively new faces in charge, saying that, as well as his experience, Letta's youth had been a factor in his selection.

The PD stalwart, who in 1998 and aged 32 became Italy's youngest ever minister under Massimo D'Alema, is hardly a new face, but he is considerably more so than the man who had been most widely touted for the premiership. Giuliano Amato, 74 and nicknamed Doctor Subtle for his political abilities, has had two spells as prime minister, the first in 1992-93 and the second in 2000-01. On Wednesday, as he entered an exhibition devoted to Machiavelli's The Prince, he said he was "absolutely" happy about Letta being chosen.

The other man who had been thought to be in with a chance of receiving a call from Napolitano, the 38-year-old mayor of Florence, Matteo Renzi, wished Letta luck on Twitter. Italian news reports said his possible premiership had been opposed strongly by Berlusconi, who views him as a formidable future rival, but this was denied by the PdL.

Just who will be asked to be in the new government remains unclear, though it is expected that Letta will try to include representatives not only of the PD and PdL but also of Mario Monti's Civic Choice centrists and some technocrats. There was speculation that Monti himself, plucked by Napolitano from Bocconi University in Milan to become technocrat prime minister in the autumn of 2011, could become foreign minister.