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Italy's new prime minister-designate Carlo Cottarelli has said he would hold an election by the start of 2019 at the latest after being given the mandate to form a government by President Sergio Mattarella.

The choice of Cottarelli, known for his strict approach to state finances, is set to further inflame Italy's bitter political divisions after populist leaders slammed the president for the collapse of their planned government and sought to extend the blame to the European Union.

Mr Mattarella said he could not appoint the Eurosceptic Paolo Savona to the post, citing concern from investors at home and overseas.

Conte and Mattarella had met on Sunday to discuss officials selected by the anti-establishment 5 Star Movement and the rightist League to comprise the new government cabinet for Italy, which has been without a government for 84 days, reports Efe news.

"Blocking a ministerial choice is beyond (the president's) role", Alessandro Di Battista, a top 5-Star politician, said.

The elections are expected to go ahead in the fall-already, this is the longest time since the Second World War that Italy has gone without a government.

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"I'm not considering the individual, I don't want someone who supports an opinion, which was expressed a few times that would inevitably lead to Italy's exit from the euro", Mattarella said.

He has as much to gain from a new election as the League, which has seen its popularity only rise in the weeks since the March 4 election resulted in a hung parliament.

Conte's decision to step aside leaves Italy in a political crisis almost three months after March's inconclusive general election.

The constitution also gives the president the power to dissolve parliament, a deterrent force which has played a part in numerous prior political crises in Italy - a country which has had 64 governments since 1946.

The choice of Cottarelli, right, who met with Mattarella in Rome, could calm the markets, which had been spooked by the prospect of a Five Star-League coalition.

The leaders of Five Star and the League, Luigi Di Maio and Matteo Salvini, were infuriated by Mattarella's refusal to accept Savona, a respected financier and economist.

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"I'll present myself to parliament with a programme which - if it wins the backing of parliament - would include the approval of the 2019 budget".

"However, it is far from certain that Mattarella's current move will end Italy's drama".

Under that article, the president would be voted on "for high treason or attacking the constitution" by all members of parliament.

But the move is a temporary measure and the PM-in-waiting says he will hold new elections by early next year. If a simple majority votes in favour, the constitutional court would then be called to decide whether to impeach or not. "Some things can not be done in the throes of anger", Salvini said.

The vote gave the centre-right alliance of the League, Mr Berlusconi's Forza Italia and a smaller party 37%, while the Five Star Movement took 32%.

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