Europe

Italy crisis: Mario Monti moves to form new government

  • 14 November 2011
  • From the section Europe
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Mario Monti is starting work to form a new government to lead Italy out of its acute debt crisis which prompted the resignation of PM Silvio Berlusconi.

The appointment of Mr Monti, an ex-EU competition commissioner, was announced by Italy's president on Sunday.

Mr Monti said he wanted to build "a future of dignity and hope" for Italy's children.

Global markets have responded cautiously to the creation of the emergency government.

In what was seen as the first test of Mr Monti's leadership, Italy sold 3bn euros ($4.2bn, £2.6bn) of new five-year bonds on Monday.

However, it had to pay more to borrow the money, a rate of 6.29%, indicating continuing unease in the markets.

Mr Berlusconi was forced to resign when the yield on Italian bonds rose to more than 7% last week, the rate at which Greece, Ireland and Portugal were obliged to seek bailouts from the EU.

Earlier, European financial markets opened slightly up. Asian stocks also closed up, with Hong Kong's Hang Seng index surging 2% to 19,508.18 and Japan's Nikkei closing up 1.1% at 8,603.70. The euro rose against the dollar on Asian markets.

'Strength not weakness'

Mr Monti, a 68-year-old economics professor, has refused to set a timetable for the formation of the new government or say who he plans to nominate as ministers.

He will hold consultations with all political parties as well as unions and industrial groups, before the formal line-up of the new technocratic government is announced later this week.

Speaking after his appointment, he said Italy "must again be, and must increasingly be, an element of strength, not weakness, in a European Union that we helped found and in which we should be protagonists".

He promised to act "with urgency" and work with parliament "to get out quickly from a situation which has elements of an emergency but which Italy can overcome with a united effort".

President Giorgio Napolitano said his nomination of Mr Monti was not about overturning the result of the elections of 2008 and that the situation could not wait for elections to be held.

Italy needed a government that "could unite the diverse political forces in an extraordinary effort warranted by the current financial and economic emergency", he said.

'Encouraging signal'

Mr Monti's appointment is favoured in financial circles

Mr Berlusconi, who had lost his parliamentary majority, resigned on Saturday after new austerity measures were passed by both houses of parliament.

In a recorded TV address on Sunday, he pledged to support a technocratic government and redouble his own efforts in parliament to modernise Italy.

Most centrists and centre-left parties in the opposition have already pledged their support to Mr Monti.

However, Mr Berlusconi's main coalition ally, the Northern League, has withheld its support until his policies have become clear.

In Brussels, European Commission chief Jose Manuel Barroso and EU President Herman Van Rompuy issued a joint statement welcoming Mr Monti's appointment as "a further encouraging signal... of the Italian authorities' determination to overcome the current crisis".

Mr Monti, a well-respected economist, is exactly the sort of man that the markets would like to see take charge at this time of crisis, says the BBC's Alan Johnston in Rome.

But there is significant opposition to him within the country, and a feeling that Italy's troubles are just too deep for a mere change of government to make any rapid, significant difference, our correspondent adds.

The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include sales of state property, a freeze on public-sector salaries until 2014 and measures to fight widespread tax evasion.

The Italian economy has grown at an average of 0.75% a year over the past 15 years.

Mr Monti's appointment comes two days after Greece, under even greater pressure from Brussels, inaugurated a technocratic government to cope with its debt problems and ratify a vital EU bailout deal.

Interim leader Lucas Papademos will face a confidence vote in the Greek parliament on Wednesday, before attending a meeting of eurozone finance ministers in Brussels on Thursday.