Italian Prime Minister Enrico Letta held his last Cabinet meeting before resigning on Friday in a lightning political crisis that paves the way for his 39-year-old rival Matteo Renzi to succeed him.

Letta was scheduled to tender his resignation on Friday to Italian President Giorgio Napolitano, who after a few days of consultations is expected to ask Renzi, who is also the head of Letta's Democratic Party, to try to form a government.

Letta stayed just 10 tumultuous months in government.

The drama in Rome comes after weeks of feuding between Letta and Renzi, Florence mayor and the newly elected ambitious leader of the governing center-left Democratic Party, which fell behind him in calling for a change in government.

"Mortal Jump", read a headline in the weekly L'Espresso, saying Renzi was "pulling the strings of an operation organized at a table two months ago: it could crown his leadership or reduce his popularity to smoke".

The "relay" between Letta and Renzi is an unpopular move among Italians, according to opinion polls, and there is concern in the party that it could strengthen disgraced former prime minister Silvio Berlusconi.

Analysts said Renzi is now tainted with the image of a cloak-and-dagger politician who overthrew Letta - a leading member of his own party - despite an earlier agreement to allow him to stay on until 2015.

But they also said he could quickly win support if he manages to push through important reforms, and investors were broadly supportive with stocks and bond rates holding stable on the financial markets.

"The reform process will probably get a boost," Italy's UniCredit bank said in a research note, adding, however, that "the road ahead is not without bumps".

The stock market in Milan on Friday rose 1.01 percent during trading, and new official data showed the economy grew by 0.1 percent in the fourth quarter - the first growth after the country's longest postwar recession.

Mario Calabresi, the editor of La Stampa daily, said the sudden crisis at the top had generated "a sense of incredulity" among Italians as most people had expected a change of government to come through early elections.

But the paper's politics expert Giovanni Orsina said that Renzi's sudden rise "might be the only sensible solution possible" as he is "considered by many the only way to get Italy out of the quagmire".

One point in Renzi's favor was the ringing endorsement he won from the Democratic Party on Thursday, when top members of the party lined up to criticize Letta and support his motion calling for a change of government.

But Renzi still faces delicate days ahead before he can finally clinch his goal of becoming the European Union's youngest prime minister and Italy's youngest ever government leader.

The former Boy Scout was cheered in the streets of the historic city as he walked to work in the Palazzo Vecchio town hall and when someone wished him well he answered: "It's always needed, especially right now."

If he gets a mandate from Napolitano to form a government as is now virtually certain, Renzi will probably have to hold consultations this weekend with all the political parties to form a coalition.

Deputy Prime Minister Angelino Alfano, leader of the New Center-Right party, a junior partner in the coalition whose votes will prove critical, has already said his support for Renzi is not a given.

Berlusconi could also score political points in the crisis, despite having been expelled from parliament last year over a criminal conviction for tax fraud and being a defendant in three other court cases.

AFP-AP