Prospect of Monti leading Italy calms jitters

By Victor L. Simpson

Associated Press

Published: Thursday, Nov. 10 2011 6:31 p.m. MST

From left, Interior Minister Roberto Maroni, Reforms Minister Umberto Bossi and Ministry for Simplification Roberto Calderoli talk at the lower chamber, in Rome, Wednesday, Nov. 9, 2011. Financial markets pounded Italy on Wednesday, sending a clear message that they want Premier Silvio Berlusconi to resign immediately. Italy's president responded there is no doubt about Berlusconi's decision to leave office, appearing to soothe investors.

Mauro Scrobogna, LaPresse) ITALY OUT, Associated Press

ROME — Expectations that respected economist Mario Monti will lead a new interim Italian government helped calm market fears that the country was heading for a Greek-style crisis that would threaten the existence of the entire eurozone.

With a groundswell of Italian politicians voicing support for a technocratic government led by the former European Union competition commissioner, confidence grew that the transition of power from Premier Silvio Berlusconi will be swift.

As in Greece, where economist Lucas Papademos was appointed prime minister Thursday, there are hopes that Monti's experience in global finance and his noninvolvement in partisan politics will help the country through market turbulence.

Italy's 10-year borrowing rate slid sharply Thursday back toward levels that are considered manageable — for now. On Wednesday, the rise in the 10-year bond yield to well over 7 percent stoked panic in financial markets that Italy was heading the same way as Greece, Ireland and Portugal and might need outside help.

Monti, 68, has become favorite to lead Italy out the financial morass after being named a senator for life by President Giorgio Napolitano who, as head of state, will name the next premier.

Napolitano assured skittish investors that Berlusconi will step down, as promised, after reforms are passed — likely by Saturday.

Monti arrived at the Quirinal presidential palace Thursday evening for a meeting that Napolitano's office described as a "courtesy visit."

"Professor Mario Monti wanted to express his heartfelt thanks" to the president for being named a lifetime senator, the palace said in a one-line statement.

Although Monti can only be named premier after Berlusconi hands in his resignation, his meeting with Napolitano will allow him to explain how he intends to command enough loyalty in the Italian legislature to ensure swift implementation of economic reforms needed to revive growth.

Berlusconi, arriving at the Senate, where the budget committee approved the reforms Thursday evening, was asked by reporters what were the prospects his splintering People of Freedom party could back a broad coalition government following his resignation.

"We'll see," Berlusconi said.

The premier was also heckled outside the Senate by some 20 bystanders the Italian news agency LaPresse said.

Napolitano's quick and assertive handling of the crisis caught the notice of President Barack Obama.

"The president spoke with President Napolitano this morning about the situation in Italy," White House press secretary Jay Carney said in Washington. "He expressed confidence in President Napolitano's leadership to put an interim government in place in Italy that will implement an aggressive reform program and restore market confidence."

The elegant, gray-haired Monti, 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.

In what may bode well for a smooth transition, Berlusconi congratulated him 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 a strategy to deal with its debts, which stand at €1.9 trillion ($2.6 trillion), or a huge 120 percent of economic output — it has to rollover a little more than €300 billion of its debts next year alone. But economic growth is weak and the government failed to enact reforms to revive it over the past decade.

With the eurozone and global economies at risk in the event of an Italian default, European governments are pushing Italy to clear up questions over its political leadership quickly.

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