Romanian President Traian Basescu wasted no time Friday naming a left-wing opposition leader to succeed the toppled centre-right prime minister in a bid to reassure financial markets.
"I have tasked Victor Ponta with forming the new government," Basescu said in a public address.
"Nothing dramatic happened today, this is democracy," he added, stressing that there was "no reason for panic on the financial markets".
Ponta, 39, was a prosecutor until 2001 when he joined the Social Democrat Party (PSD). In 2004 he became one of the youngest Romanian lawmakers.
He briefly served as minister twice, in 2004 and in 2008, and was elected president of the PSD in 2010.
"I will submit the list of ministers and the government's programme very rapidly," said Ponta, who is co-president of the opposition Social-Liberal Union (USL).
"I will try to run the government until the elections in a way that gives Romanians hope that things are moving in the right direction," he added.
Romania's centre-right government headed by Mihai Razvan Ungureanu collapsed earlier Friday after a no-confidence motion submitted by the left-wing opposition which criticised its privatisation plans.
An open admirer of Bolivian revolutionary Che Guevara, Ponta describes himself as a hardline leftist.
He recently said that Romania should not be treated like a colony by foreign companies.
But he stressed that he would stick to the stand-by arrangement signed by Romania with the International Monetary Fund (IMF) last year, if he were appointed prime minister.
The IMF and the EU said in a statement they would continue to work with the Romanian authorities and return to Bucharest to resume the formal discussions with the new government when it is formed.
"We have every expectation that Romania will continue to observe its economic policy commitments to its international partners," the IMF said.
"Sound macroeconomic policy and continued structural reforms remain essential for Romania's economic recovery and long-term growth."
Romania was forced to call on the IMF and the EU for a 20-billion-euro ($26 billion) lifeline in 2009 and took drastic measures in return to curb spending, cutting public sector wages by 25 percent and freezing pensions in 2010.
It also agreed to privatise national assets, including Romania's biggest copper mining company Cupru Min, and it sold minority stakes in several energy firms.
Examining possible scenarios ahead of the confidence vote, the JP Morgan financial firm said that a government formed by the opposition could lead to "less reforms and less spending control on the public sector side".
"Populist measures may not be ruled out," it said in a report.
But financial analyst Aurelian Dochia said that he expected Ponta to become more reform-oriented once he becomes prime minister.
"I am certain he will observe the stand-by arrangement with the IMF, even if he may want to renegotiate some details," he said.
"Calling the deal off would have a terrible impact on the financial markets, and I don't think this will happen."
"Ponta is willing to take advice before making a decision," political analyst Andrei Taranu told AFP.
"This is important because he will head a coalition government and will have to reconcile the ambitions of the three parties" that make up the USL alliance which will back him in parliament, he stressed.
Ponta's mandate will be a short one, with general elections due in November.