ECONOMIST Mario Monti agreed to form a new Government in Italy that will attempt to rescue the country from economic disaster.

Presidential palace officials announced the former European Union competition commissioner had received the formal mandate from President Giorgio Napolitano following the resignation of Silvio Berlusconi.

The move came as former UK Prime Minister Tony Blair said the “whole weight of Europe and its institutions” must be put behind the euro rescue bid.

He said the single currency had been built on a decade-long economic “myth” that the Italian and German economies were the same, and said Gordon Brown had been right economically to block the UK’s entry into the currency zone.

Speaking to BBC1’s Andrew Marr Show, Mr Blair said: “The choices are very, very difficult and very painful. They are painful if we take the measures necessary to stabilise the single currency; if the single currency broke up it would be catastrophic.”

Italy is under pressure from international investors skittish about the country’s massive debts and faces severe pressure to have a new Government before financial markets open.

However, Mr Monti must now draw up a Cabinet, set out his priorities and see whether he has enough power in Parliament to govern effectively, which could take several days.

Early yesterday evening, Silvio Berlusconi’s party gave its crucial approval for Mr Monti to assemble a Government, but insisted it will last only long enough to implement urgently needed economic reforms.

Mr Berlusconi also hinted at a possible return to power, saying to supporters: “I share your spirit and I hope to resume with you the path of government.”

Most centrist and centre-left parties in opposition pledged support for a Monti Government, saying he has the moral authority and economic knowhow to reform Italy’s economy.

The Northern League, a long-standing ally of Mr Berlusconi, withheld its support from the economist who now faces a huge task: avoid an Italian default that could tear apart the coalition of 17 countries that use the euro and hit the economies of Europe and the US as they try to avoid a new recession.

Mr Berlusconi’s resignation came reluctantly on Saturday, as the former Prime Minister was forced to bow to market pressure to fix the ailing economy.

Pressured for days by the markets, the 75-year-old slipped out of the presidential palace through a side door after handing Mr Napolitano his resignation.

As the third largest economy in the 17-nation eurozone after Germany and France, Italy is considered too big for Europe to bail out as it did Greece, Portugal and Ireland.

The next Italian Government needs to push through even more painful austerity measures to deal with the country’s debts, which stand at €1.9 trillion (£1.63tn), or 120% of economic output.