Rome (CNN) -- Economist Mario Monti was nominated Sunday to replace Silvio Berlusconi as Italy's prime minister, presidential spokesman Donato Marra said.
Berlusconi resigned Saturday amid the country's ongoing financial crisis.
In announcing his nomination, Italian President Giorgio Napolitano said Monti, a former European Union commissioner, is "gifted, competent, experienced" and well respected in Europe and internationally.
"This is the moment of his test," Napolitano said.
For his part, Monti in brief remarks to reporters, thanked Napolitano "for his trust in me" and pledged to do his best to serve Italy during the economic crisis, speaking of the importance of providing a better future for Italy's children. He said he will work with urgency, but also with scruples.
Monti ultimately will face approval by the Italian Parliament.
He must return to Napolitano within hours or days and accept the nomination fully, at which point he would be sworn in. Within days after being sworn in, Monti will have to go to parliament to present his government -- essentially his cabinet and his government plan. The upper and lower houses of parliament have 10 days from the time Monti is sworn in to separately hold votes of confidence on the new goverment before it would be finalized.
Napolitano met the heads of the Senate and the lower house of parliament Sunday, among other politicians, during the course of a full day of consultations, his office said.
Berlusconi's resignation was greeted with cheers and dancing in the streets, as people waved the Italian flag and sang the nation's anthem.
He is the second prime minister to resign this month over the debt crisis sweeping across Europe. Greece's George Papandreou was replaced Wednesday by Lucas Papademos, a former European Central Bank official.
European Commission President Jose Barroso and European Council President Herman Van Rompuy welcomed Monti's nomination in a joint statement.
"We believe it sends a further encouraging signal -- following the swift adoption of the 2012 Stability Law -- of the Italian authorities' determination to overcome the current crisis," the statement said.
Support appeared to be growing this week for Monti to take the helm of a technocratic administration. Other names floated include former Justice Minister Angelino Alfano and Gianni Letta, Berlusconi's chief of staff.
The Berlusconi government will back Monti, with conditions, Alfano, a spokesman for Berlusconi's People of Freedom party, told reporters on Sunday. Those conditions would be that the new government is comprised of technocrats, and that it concentrate on economic reforms, he said. The duration of the new government must be connected to how long those reforms take, according to Alfano.
Left-wing opposition leader Pier Luigi Bersani told reporters after meeting with Napolitano that his party supports the new government. "A new and technocrat government is needed ... because the crisis is serious," he said.
Bersani said his party expressed support for the upcoming government to carry out reforms in the electoral law and in the government, and thanked Napolitano for his handling of a "very grave crisis" in which "there was no time to lose."
"We need to do all that is possible to conserve our family and our companies from the global crisis that has hit all the advanced countries," Berlusconi said Sunday in a speech.
Berlusconi has said he does not intend to stand again if new elections are called.
But in a letter to the head of a far-right party, Berlusconi suggested he did want to return to power.
"I hope to be able to undertake with you the path of government," he said in a letter to Francesco Storace, the head of the right-wing La Desta party.
"I'm proud of what we've managed to achieve in these three and half years, which were marked by an unprecedented international crisis," Berlusconi said in the letter which was posted on his Facebook page. It was dated before his resignation.
The 75-year-old business magnate stepped down just hours after the lower house of parliament approved austerity measures aimed at restoring confidence in Italy's economy.
Since entering politics nearly two decades ago, Berlusconi has been one of his country's great survivors, hanging on despite facing numerous trials, on charges ranging from corruption to having sex with an underage prostitute, none of which has resulted in a jail term.
The billionaire was elected for the third time in 2008, under the banner of the newly created People of Freedom party.
In the three and a half years since, his colorful personal life has claimed ever more headlines, as his second wife filed for divorce, he was charged with having sex with an underage nightclub dancer and abusing power, and the so-called "bunga-bunga" parties held at his home gained international notoriety.
On Tuesday, he failed to win a parliamentary majority on a budget vote that should have been routine, and had to face the inevitable: his days at the helm were numbered. In the end, it was his perceived failure to tackle Italy's debt crisis rather than any private scandal which had brought him down.
On Saturday, the Italian lower house of parliament approved a series of austerity measures demanded by Europe to shore up confidence in the country's economy. It passed by a vote of 380 for to 26 against.
The package, which includes spending cuts and proposals to boost growth, was approved by the Senate Friday, resulting in a market surge.
The measures include pension reform, with plans to raise the retirement age from 65 to 67, the privatization of state-owned companies and sale of state-owned properties, the liberalization of certain professions, and investment in infrastructure.
Italy is the the third-largest economy using the euro, and a meltdown would have a massive impact on global markets.
Berlusconi had pledged to step down once the austerity measures passed both houses of parliament after losing his majority.
The structural reforms demanded by the European Central Bank and the European Commission must be brought in without delay, said Emma Marcegaglia, head of the Italian employers' association, Confindustria.
"These reforms are the only thing that can take us out of the current situation," she said. "We have no choice. We cannot wait for three months for the next elections, this would mean the destruction of Italy. "
She said a rapid solution to the political uncertainty in Italy was essential to put it "firmly back on the road to credibility."
She added: "We are not Greece, we are a strong economy, we are the world's eighth largest economy. We have many state assets and have lots of potential. But we have to survive this very difficult situation."
Italian borrowing costs continued to ease Friday, after spiking above 6.75% Wednesday, giving investors hope that Italy is finally starting to make some progress toward addressing its massive debt problems.
Yields on Italian 10-year bonds were trading at 6.5% Friday after dipping as low as 6.43%. While that's still stubbornly above 6%, it's finally moving in the right direction.
It is imperative to keep Italy's 10-year bond yields well below 7% because that was the level that eventually led to bailouts for Ireland, Portugal and Greece.
Currently, Italy -- the biggest bond issuer in Europe -- possesses a massive gross debt of roughly €1.9 trillion and a debt-to-GDP ratio of 120%. The country is widely considered to be too big to fail. But it may also be too big to bail.
CNN's Laura Smith-Spark contributed to this report