Letta "submitted his irrevocable resignation," a statement from the presidency said on Friday. President Napolitano is now set to hold consultations to nominate a successor.

On his Twitter account, the 47-year-old Letta wrote he was resigning and thanked "all those who have helped me."

Napolitano is widely expected to accept Letta's resignation and, following consultations with leading politicians, ask Florence Mayor and the leader of Letta's Democratic Party, Matteo Renzi, to try and form a new government.

The consultations are expected to last through Saturday.

Renzi, 39, rallied his party's leadership on Thursday to back him in a vote of no-confidence against Letta. He has accused the prime minister of failing to curb Italy's economic and political hardships.

Napolitano said that "an effective solution to [Italy's political] crisis was more than ever necessary," considering the state of the economy and the need to change electoral law.

Hope for 'stable' outcome

Following Letta's resignation, Chancellor Angela Merkel's spokesman said Germany hoped for a "stable" outcome in Italy.

"Italy is and will be a very important partner for us in Europe and in the eurozone," said Steffan Seibert. "That is why we are relying on the leaders of all the democratic parties in Italy being able to quickly agree with one another on a stable solution."

European Commission President Jose Manuel Barroso said he called Letta to express his "great appreciation for the great cooperation that we have developed."

Barroso also said he knew Letta's expected successor was a "very committed European."

"I have met Renzi several times already...and he seems to me a very committed European with a deep, let's say interest in advancing the process of European integration and the general position of Italy being always very loyal to the European project," he said.

dr/hc (AP, dpa, Reuters)