Markets calm as Monti is favored to lead Italy
Source: Agencies |
November 11, 2011, Friday
|
Print Edition
Print Edition
THE prospect of an Italian government led by leading economist Mario Monti yesterday helped calm market anxiety that the country was heading for a Greek-style crisis that could threaten the existence of the euro.
With a groundswell of Italian politicians voicing support for a technocratic government led by the former European Union competition commissioner, there is a growing degree of confidence that the transition from Silvio Berlusconi will be swift.
As in Greece, where economist Lucas Papademos has been appointed prime minister, there are hopes Monti's experience of global finance and his non-involvement in his country's partisan politics will help calm markets.
Italy's 10-year borrowing rate slid sharply yesterday, back towards levels considered manageable. On Wednesday, the rise in the country's 10-year bond yield to well over 7 percent stoked fears in financial markets that Italy was heading the same way as Greece, Ireland and Portugal in needing outside help.
Monti, 68, has become favorite to lead Italy out of the financial morass after Wednesday's surprise move by President Giorgio Napolitano to name him a senator for life. Napolitano also offered emphatic assurances to skittish investors that Berlusconi will step down, as promised, after reforms are passed.
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 pressure to prove it has a strategy to deal with its debts, which stand at 1.9 trillion euros (US$2.6 trillion) - 120 percent of economic output. It has to roll over a little more than 300 billion euros of debts next year alone. But economic growth is weak and the government has 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.
With a groundswell of Italian politicians voicing support for a technocratic government led by the former European Union competition commissioner, there is a growing degree of confidence that the transition from Silvio Berlusconi will be swift.
As in Greece, where economist Lucas Papademos has been appointed prime minister, there are hopes Monti's experience of global finance and his non-involvement in his country's partisan politics will help calm markets.
Italy's 10-year borrowing rate slid sharply yesterday, back towards levels considered manageable. On Wednesday, the rise in the country's 10-year bond yield to well over 7 percent stoked fears in financial markets that Italy was heading the same way as Greece, Ireland and Portugal in needing outside help.
Monti, 68, has become favorite to lead Italy out of the financial morass after Wednesday's surprise move by President Giorgio Napolitano to name him a senator for life. Napolitano also offered emphatic assurances to skittish investors that Berlusconi will step down, as promised, after reforms are passed.
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 pressure to prove it has a strategy to deal with its debts, which stand at 1.9 trillion euros (US$2.6 trillion) - 120 percent of economic output. It has to roll over a little more than 300 billion euros of debts next year alone. But economic growth is weak and the government has 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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