A cigar-chomping former communist, Pier Luigi Bersani, will become the centre-left's candidate at the general election in Italy to be held early next year.

With more than 80% of the ballots counted in the final round of a primary election, it was clear Bersani had crushed a challenge from the young mayor of Florence, Matteo Renzi, who had vowed to sweep the old guard from the leadership of Italy's centre-left Democratic party (PD). He led his rival by 61% to 39%.

In a Twitter message soon after conceding , Renzi said: "It was the right thing to try, it was beautiful to do it together. Thank you all from the heart."

With opinion polls suggesting the PD and its allies could win an outright majority in both houses of parliament, the vote on Sunday may also have decided the issue of who will lead Italy after the current, non-party government of Mario Monti runs to the end of its term. In the opening round of the primary on 25 November, more than 3 million people took part.

Next year's general election, which is most likely to be held on 10 March, will be crucial not just for Italy but the rest of the European Union and beyond. The winner will take on the onerous task of steering Italy out of the euro crisis and a recession that is expected to last until at least the end of 2013.

As minister for economic development in the last centre-left government from 2006 to 2008, Bersani masterminded successive rounds of liberalisation aimed at increasing competition and eroding the privileges of some of Italy's many hidden cartels. To improve its chances of success, however, the PD will be fighting the election in an alliance with the more radical left Ecology and Freedom party (SEL). The leader of the SEL, the governor of Puglia, Nichi Vendola, was eliminated in the first round of voting.

The left's primary elections were both divisive and unifying. Renzi repeatedly pledged to send the older members of the PD's leadership "to the scrapyard". But pollsters said that it also won him the support of many on the left of the party and in the SEL, eroding the conventional division between radicals and moderates.

The ballots – and the campaign leading up to them – injected a new vigour and sense of urgency into a centre-left which for years has struggled to best the charismatic, if scandalous, Silvio Berlusconi. Since resigning in November 2011 after losing his parliamentary majority, Berlusconi has repeatedly changed his mind about whether to run in next year's election.

His indecision has had a devastating effect on the prospects of the Freedom People, the movement he founded. Most recent polls have assigned it around 16% of the vote – less than the Five Star Movement led by the comedian and blogger Beppe Grillo.