Italian Prime Minister designate Mario Monti (pictured) will form a new government Wednesday as the country’s bond yields climbed to over 7%, the level at which Greece and Ireland were forced into bailouts.
REUTERS - Prime Minister designate Mario Monti will form a new Italian government on Wednesday to face a crisis that has brought Italy to the brink of economic disaster and endangered the entire euro zone.
A statement from the presidential palace announced that Monti, appointed only on Sunday, would meet head of state Giorgio Napolitano on Wednesday morning to confirm he can form a government. He is expected to announce a cabinet composed mainly of technocrats.
Monti has completed the process of forming a government in less than three days, much less than normal, as Italy races to ward off a major financial and political crisis that has pushed its borrowing costs to untenable levels.
The new administration led by former European Commissioner Monti must push through a tough austerity programme demanded by European leaders to restore shattered confidence in Italy.
PROFILE: MARIO MONTI
Underlining the pressure on Monti to act fast was renewed market turmoil , with yields on Italy’s 10 year BTP bonds climbing to over 7 percent on Tuesday, the level at which Greece and Ireland were forced into bailouts.
Emma Marcegaglia, head of employers association Confindustria, told reporters after meeting Monti: “We said we will support his government very much. We think this government is the last chance for Italy to exit from this situation of emergency”.
Monti’s chances were considerably boosted earlier by backing from the PDL party of Silvio Berlusconi, who was forced to step down on Saturday by the crisis.
Angelino Alfano, secretary of the centre-right PDL, told reporters: “We think that the efforts of Professor Monti are destined to have a good outcome.”
Backing from the PDL, Italy’s biggest party, was significant because many of its members had until now opposed the predominantly technocrat government Monti is putting together.
Monti’s new government must have strong parliamentary backing to implement what are likely to be unpopular austerity reforms. Any failure or delay in his efforts would cause a devastating new assault from financial markets.
The Italian association of foreign banks added to the pressure, warning that failure by Monti would be a disaster.
Monti began consultations on Monday with political parties, trade unions and business groups as well as youth and womens’ organisations. He will finish the consultations on Tuesday night.
Monti was nominated on Sunday by Napolitano, who has engineered an extremely rapid government transition in response to the crisis.
After a brief respite at the end of last week when it became clear Berlusconi would resign , Italy’s borrowing costs have now returned to critical levels amid uncertainty over whether Monti would succeed.
Rescuing Italy, with its 1.8-trillion-euro public debt, would be too much for the euro zone’s existing financial defences.
Monti said his government should last until the next scheduled elections in 2013, despite widespread predictions that politicians intend to give him only enough time to implement reforms before precipitating early polls.
Monti has said he would like to include politicians in his cabinet but the big parties are insisting it should be made up purely of technocrats a sign of their wariness about a process forced by financial pressure.
Political sources said mutual suspicions and disagreements among the parties was complicating the attempt to include political figures.
Lack of political cover for unpopular reforms could be dangerous for Monti.
Pier Luigi Bersani, leader of the second biggest parliamentary group, the Democratic Party, said he had an “encouraging” meeting with Monti. It covered the financial crisis as well as constitutional reform and Italy’s widely criticised election laws, and the party had not set any time limit on the government.
“We confirmed we want to support a technical government of high quality, not to offer it less support but to support it better,” he said.
European Council President Hermann Van Rompuy said the euro zone was watching events in Italy “very closely”.
Monti, 68, faces formidable political headwinds.
Berlusconi, forced out to the mocking jeers of thousands of protesters on Saturday, is reported to have told supporters the PDL “can pull the plug whenever we want”.
The president has called for an extraordinary national effort to win back the confidence of markets, noting that Italy has to refinance some 200 billion euros ($273 billion) of bonds by the end of April.
Date created : 2011-11-15