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.
Italian President Sergio Mattarella said he refused to approve populist leaders' choice of an economy minister who has expressed anti-euro views because the appointment would have "alarmed markets and investors, Italians and foreigners".
By blocking Savona the populist parties were unable to form a government, which Italy has struggled to form a government since the elections on March 4. "If you want to discuss it, it should have been done openly and with a serious debate", which he noted hadn't been part of the electoral campaign.
Financial markets tumbled last week on fears the Five Star-League coalition would unleash a spending splurge and dangerously ramp up Italy's already huge debt, which is equivalent to more than 1.3 times the nation's domestic output.
"I accepted every proposed minister apart from the minister of the economy", Mattarella told reporters.
Italy, the EU's fourth-biggest economy, has been without a government since elections in March because no political group can form a majority.
"If there's not the OK of Berlin, Paris or Brussels, a government can not be formed in Italy".
"I asked for that ministry an authoritative political figure from the coalition parties who was not seen as the supporter of a line that could provoke Italy's exit from the euro", he added.
Harvey Weinstein charged with rape
Mr Weinstein, 66, is charged with two counts of rape and one count of a criminal sexual act against two women, prosecutors said. Weinstein is accused of confining her in a Manhattan hotel room and raping her in 2013, according to a court complaint .
Critics, including Luigi Di Maio, the M5S leader, were quick to criticise Mattarella, accusing him of an abuse of power and calling for his impeachment.
On Friday, ratings agency Moody's threatened to downgrade Italy's debt rating, citing a risk the a populist-led government might fail to reduce its public debt.
Cottarelli would appease financial markets but his administration may not get sufficient parliamentary support, meaning such a cabinet would remain in office as a caretaker for some months until a new round of elections is held.
"However, it is far from certain that Mattarella's current move will end Italy's drama".
In a statement late on Sunday, the three-time premier took a much more measured tone about the collapse of the Five Star-League experiment, refusing to criticise Mr Mattarella.
Under that article, the president would be voted on "for high treason or attacking the constitution" by all members of parliament.
Luigi Di Maio of the 5-Star Movement attends a news conference in Rome. The constitutional court would then be called to decide whether to enforce the decision. Some things can not be done in the throes of anger.
The centre-right Forza Italia party and the centre-left Democratic Party (PD) both denounced calls for impeachment.