Italy anxiously awaits reaction to new premier
Italy anxiously awaits the reaction of financial markets Monday to the appointment of former European Commissioner Mario Monti to head a technocratic government, hoping it will end a disastrous week for the euro zone’s third largest economy.
In a frenetic weekend of political activity, Italy’s parliament approved a package of economic reforms agreed with European leaders, Prime Minister Silvio Berlusconi resigned and President Giorgio Napolitano appointed Monti, a respected international figure as head of a new government.
The whole hurried process, much faster than is normal, was designed to calm markets which last week pushed Italy’s borrowing costs to the levels that forced Portugal, Greece and Ireland to seek bailouts.
The first test will come Monday when the Treasury offers up to 3 billion euros worth of 5-year BTP bonds in an auction that will show how far fragile confidence in Italy’s battered public finances has been restored.
Because the euro zone cannot afford the much bigger bailout that would be needed to save its third largest economy, the crisis threatened a European financial meltdown.
Napolitano said after nominating Monti that there must be an extraordinary effort to address the crisis and Italy could not wait for elections to solve political paralysis. He said Italy must recover the trust of investors and European institutions.
Monti said he would work urgently to form a government and to pull Italy out of the crisis. The new government is thought likely to be a tight cabinet of around 12 technocrats and to be appointed within days.
“I intend to fulfil this task with a great sense of responsibility in the service of our country. In a moment of particular difficulty for Italy, in a turbulent situation for Europe and the world, the country needs to meet the challenge,” Monti said after his nomination.