Mauro Scrobogna, LaPresse) ITALY OUT, Associated Press
ROME — Market pressure on Italy eased somewhat Thursday after the president vowed to accelerate reforms to make way for Premier Silvio Berlusconi's resignation as early as this weekend and a bond sale went better than expected.
President Giorgio Napolitano assured skittish investors that Berlusconi will step down, as promised, after reforms are passed — likely by Saturday — and he named respected economist Mario Monti senator for life in a move that puts him in line to run the next government.
In what may bode well for a smooth transition, Berlusconi congratulated Monti on his new post in a telegram, wishing him "fruitful work in the country's interest" and recognizing his accomplishments.
Italy is under intense pressure to prove it has the political strength to enact measures to increase confidence in its ability to repay its debts, which stand at a huge 120 percent of economic output. But economic growth is weak and the government failed to enact reforms to revive it over the past decade.
Investors are worried that if Italy's borrowing rates remain too high for too long, it will be blocked out of financial markets and need rescue loans to repay its bondholders. That would be devastating for both the euro and the global economy.
Political sentiment appeared to be building in favor of a government of technocrats headed by Monti, the clear preference of international investors.
The elegant, gray-haired Monti, 68, made his reputation as a strong-willed economist when as EU competition commissioner he blocked General Electric's takeover of Honeywell. He currently heads Milan's prestigious Bocconi University.
Napolitano, who is charged with tapping a candidate to form a new government, will want to ensure the new administration enjoys broad support in parliament so it can not only get reforms passed but also implemented.
Berlusconi's party remained split on whether to support Monti although some key elements have signaled support, while the allied Northern League, Berlusconi's key coalition partner, were staunchly opposed.
The main opposition parties appeared willing to accept Monti and a technocratic government, but some more hard-line elements of the left, including unions, remain opposed.
Angelino Alfano, who Berlusconi hand-picked to succeed him as leader of the main conservative party, the told Italian TV on Wednesday that Berlusconi would step down by Monday. Foreign Minister Franco Frattini said early elections would not help the country solve its economic problems — a clear message to a group within in Berlusconi's party that is pressing for a vote.
"It would be prudent not to rush to the ballots, plunging the country into a three-month electoral campaign as spreads fly and our debt rises," Frattini said.
Italy's leading business newspaper summed up the growing sentiment with an enormous bold-faced headline: "Hurry Up."
The country's situation became critical on Wednesday, when the 10-year bond yield jumped above the perilous 7 percent mark on worries that the tenacious Berlusconi would not leave easily, despite a promise to resign after reforms were passed. Greece, Portugal and Ireland eventually had to seek bailouts after their borrowing rates rose above 7 percent.
The yield eased back below 7 percent on Thursday, to 6.88 percent by early afternoon, after a bond sale went better than expected.
The government easily sold €5 billion ($6.8 billion) in 12-month bonds at an interest rate of 6.087 percent. That's up sharply from 3.57 percent in the last such auction last month, but well below analyst expectations of 7 percent. Demand for the bonds was also strong, almost twice the amount on sale.
Italy, which as total debt of €1.9 trillion ($2.6 trillion), has to tap financial markets for over €300 billion ($412 billion) in 2012 alone.
With the global stakes high, foreign government leaders were eager to see some progress that could restore confidence to markets.
British Prime Minister David Cameron said Italy posed "a clear and present danger to the eurozone."
"If the leaders of the eurozone want to save their currency then they — together with the institutions of the eurozone — must act now," Cameron said at an investment conference in London. "The longer the delay, the greater the danger."
In Brussels, the European Union emphasized Thursday that Italy is unlikely to fulfill its promise of balancing its budget by 2013 if recently promised austerity and reform measures aren't implemented. According to the EU's latest forecast, which does not take into account the most recently promised reforms, Italy will still run a deficit of 1.2 percent of GDP, with debt close to 119 percent of economic output.
Barry reported from Milan. Danica Kirka contributed from London and Gabriele Steinhauser from Brussels.
- The Rohingyas: A look into one of the world's...
- Lindsey Stirling reflects on global audience,...
- The 10 best cities in America for job seekers...
- Extreme education makeover: Are the...
- John Nash, the mathematician who inspired 'A...
- Boy Scouts' leader says ban on gay adults not...
- Veterans frustrated by presidential debate on...
- Ohio patrolman acquitted in shooting deaths...
- Boy Scouts' leader says ban on gay... 168
- Congressional delegation not impressing... 32
- Obama: Climate change deniers endanger... 29
- Clinton: GOP threatening small-business... 19
- Ireland has voted to legalize gay... 16
- Sen. Orrin Hatch calls HBO story on... 15
- Lindsey Stirling reflects on global... 14
- Ohio patrolman acquitted in shooting... 13