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Italy president resigns in test for Renzi as Europe looks on

[ROME] Italy's veteran President Giorgio Napolitano resigned Wednesday, setting the stage for the election of a new head of state, a thorny process which could prove a political headache for Matteo Renzi's government.

The 89-year old had announced in December that he would be leaving office well before the end of his term in 2020 because of his advancing age.

He had been persuaded in 2013 to stay on for an unprecedented second term after deadlocked elections sparked a political crisis in the eurozone's third-largest economy - but had always been expected to step down early.

Prime Minister Matteo Renzi paid tribute to the outgoing president, expressing "gratitude and emotion for what Giorgio Napolitano has done over the past nine years, showing quality and political intelligence".

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His words were echoed by Martin Schulz, president of the European Parliament, who said Napolitano "steps down today, but his legacy will be everlasting, in Italy and in Europe."

Not everyone was sorry to see the president leave. The right-wing Giornale newspaper led with the headline "He's gone. Finally", while the anti-establishment Five Star movement hailed the departure of "one of the worst presidents."

Parliament will meet on January 29 along with 58 regional deputies for the first round of voting to choose the next president.

Potential candidates include former prime ministers Romano Prodi and Giuliano Amato, as well as Economy Minister Pier Carlo Padoan, Defence Minister Roberta Pinotti and former Rome mayor Walter Veltroni.

European Central Bank chief Mario Draghi on Wednesday rejected speculation that he had his eye on the job.

"The election of the President of the Republic, just like the election of the pope, is completely unpredictable, but unlike a conclave (papal election), it doesn't even have the help of the Holy Spirit," said Luigi La Spina, editorialist for La Stampa daily.

While the post of president is largely ceremonial, it takes on vital importance during times of political crisis when the president can help steer the formation of a new government.

"Napolitano has been president in one of the most difficult phases in our country, not just politically but economically," Francesco Clementi, professor of constitutional law at the Luiss University in Rome, told AFP.

"I think the presidential election will certainly be complex... the government will have to work hard" to find a figure who will suit parties from across the political spectrum, he said.

The election does carry political risks for Renzi, and Europe will be watching his diplomatic overtures closely, with any in-fighting in the recession-hit country bound to inflate fears of a knock-on effect on a still delicate eurozone.

The successful candidate must win the votes of two-thirds of lawmakers in both houses of parliament - and Renzi will need to keep the more rebellious wing of his party in line to ensure he gets his favoured candidate.

The 40-year old will want a president who can help bridge political differences which otherwise threaten to scupper the PM's ambitious reform programme.

Mr Renzi would also need someone willing to dissolve parliament and call snap elections if, as experts suggest, he might favour fresh polls as a last resort to push through his reforms.

"Choosing an unassuming and bland figure would be a mistake," political watcher Michele Ainis said in the Corriere della Sera daily.

"Firstly, because the stay in the president's palace always ends up revealing its resident's true colours, and secondly because the storm is not over. We are right at its heart," he said.

Christian Schulz, Berenberg senior economist, warned investors would be watching closely "after the recent experience of Greece, where the pro-reform government tripped over presidential elections on 29 December, triggering snap elections that look set to be won by the radical left."

"Failure to elect a president would probably force a new election, maybe even a change of leadership in the ruling Democratic Party," he said.

In order to stave off a crisis, Mr Renzi may be forced to clinch a deal with the opposition, particularly former premier Silvio Berlusconi - a likely but controversial move bound to spark a heated response from those on the far left of his Democratic Party (PD).