ROME (AFP) - Italy's prime minister unveiled a new coalition government on Saturday, finally breaking a two-month stalemate in the recession-hit country which had tested the patience of European partners with a motley team including Silvio Berlusconi's protege.

Centre-left moderate Enrico Letta named as his deputy Angelino Alfano - a move aimed at appeasing the right but which angered critics of billionaire tycoon Berlusconi, who they claim will have the reins of power in his grasp.

Fabrizio Saccomanni, a director at Italy's central bank, was handed the post of finance and economy minister, tasked with dragging the euro zone's third-largest economy from its worst recession in 20 years under the watchful gaze of concerned international partners.

Ms Emma Bonino, a former European commissioner and rights campaigner, will be the new foreign minister in a new government with a "strong female element," noted Mr Letta.

Mr Alfano will also hold the post of interior minister while his predecessor in that job, Anna Maria Cancellieri, will run the justice ministry.

The new cabinet was expected to be officially sworn in on Sunday and Mr Letta has said he wants to move quickly to tackle the social fallout of the recession by tackling unemployment and moving away from austerity imposed by his predecessor Mario Monti.

The centre-left - ridden with internal divisions since winning the general election in February but without the majority to govern - welcomed the new appointments.

"We have a government and, in a difficult international setting, finally the political arena is giving a sign," said rising Democratic Party (PD) star Matteo Renzi.

The main employers' lobby Confindustria also greeted the news, saying the new ministers "will make a real stamp on Italy's future" and calling on the government to make their priority boosting growth.

Mr Letta had earlier said he was determined to renew confidence in the country's scandal-hit and bickering political institutions, but some were not convinced by his choices.

"Old names to resolve old problems. We're not going to find solutions this way," said Mr Vito Crimi, head in the senate of the protest Five Star Movement, which won a quarter of the vote in February and is now an opposition party.

Former comedian Beppe Grillo, who founded the movement, described it as "the night of the Republic." Anti-mafia prosecutor Antonio Di Pietro went further: "Berlusconi, with this government, is assured impunity and the country has been condemned."

The media magnate is currently on trial on charges of having sex with a 17-year-old prostitute - but his popularity levels have recently risen again, which gave him a certain leverage with Mr Letta.

The 46-year-old prime minister had fought hard to forge a deal between his Democratic Party and Berlusconi's People of Freedom party (PDL).

President Giorgio Napolitano, 87, said it was "the only government possible and we could not wait any longer for it to be formed." Grasping Letta's hands, he called for "the greatest possible cohesion" in the new team.

Mr Letta said he was proud to have included younger ministers and women in his cabinet to help renew the country's tired political scene.

Among the new faces were Ms Cecile Kyenge, the first black person to become a minister in Italy. The new integration minister, 49, said her appointment was "a decisive step to concretely change Italy".

In another first, an Olympic canoeist, Mr Josefa Idem, was named sport minister.

Mr Letta is expected to unveil his programme in a parliamentary session on Monday.

"Napolitano has got his miracle. The first Letta government - young and new - is the turning over a page," said political commentator Giancarlo Santalmassi from InPiu, adding however that differences within the government could see it fall within 18 months.

Clinching cross-party unity had proved tricky, especially with the scandal-tainted Mr Berlusconi, who had insisted on the abolition and repayment of a controversial housing tax introduced in 2012.

But the only alternative to a deal would have been fresh elections - which neither side would necessarily have won with the majority needed to govern.

A new set of elections would also have raised fears among international investors of increased political instability.

Ratings agency Moody's affirmed Italy's Baa2 rating and negative outlook Friday, warning of an "elevated risk" that the political stalemate would harm investor confidence.

Milan's stock market closed down 0.51 per cent on Friday as traders appeared jittery over the chances of forming a government and Letta had raced to clinch a deal before the markets open again on Monday.

While Mr Berlusconi's critics said the tycoon was the real victor of the institutional crisis, he took credit for helping Mr Letta bring about the coalition deal.

He said he set "no conditions" for his support in forming the new government. "Therefore, we contributed to being able to form a government in a short time."