Italy crisis: Debt cost puts pressure on Mario Monti

 

Mario Monti: "A future of dignity and hope" for Italy's children

Italy's cost of borrowing has risen again to the 7% danger level, putting the new PM Mario Monti under pressure as he works to form a government.

The figure indicates continuing nervousness about the country's high level of debt.

Mr Monti, 68, got the backing of both main parties during talks on Tuesday.

He is putting together a government led by technocrats, but it must still have parliament's support to push through tougher austerity measures.

Mr Monti has also met representatives of industrialists, trade unions and youth and women's groups.

The office of the Italian President, Giorgio Napolitano, said Mr Monti had succeeded in forming a new government.

Mr Monti is expected to meet the president and name his cabinet on Wednesday.

It is not clear if his cabinet will include politicians or consist entirely of technocrats such as himself.

Only one party, the right-wing Northern League, says it will withhold its support.

Angelino Alfano, leader of the centre-right People of Freedom Party (PDL) of outgoing PM Silvio Berlusconi, said "we think that the efforts of Professor Monti are destined to have a good outcome".

Analysis

Crucially, the largest faction, the PDL - loyal to Silvio Berlusconi - has backed the Monti plan.

Mr Berlusconi continues to wield considerable influence in both houses of parliament. And rather ominously for Mr Monti, he is reported as having said that he may decide to "pull the plug" if he does not like what the new administration does.

But for now - and at least in public - the left, the centre and much of the right of the political spectrum here is going along with idea of installing what will be an unelected prime minister.

It is still not clear whether the new ministerial team will be made up solely of technocrats, or will include politicians as well.

Mr Monti is expected to present both his cabinet and his programme for government to parliament by the end of the week. And he will only be able to begin his work once it endorses both.

He has talked about the nation needing to be prepared to make sacrifices. And if he does intend to drive through a major, painful austerity programme it will be important for him to be able to show that he has substantial backing in parliament.

And the leader of the centre-left Democratic Party (PD), Pier Luigi Bersani, said "we encouraged Professor Monti to go ahead with determination".

"We did not set a deadline to the government," he added.

Sense of urgency

Mr Monti, an unelected technocrat and former EU commissioner, has said he will "act with urgency" to address Italy's deep-rooted economic problems.

He also intends to remain in office until the end of the current legislature - 2013.

He has not yet revealed details of the economic reforms he might try to implement.

He was appointed on Sunday after emergency austerity measures were passed by parliament, triggering the resignation of Mr Berlusconi.

The Italian bond rate reached a record of 7.48% last Wednesday, draining investor confidence and hastening Mr Berlusconi's departure. Lenders worry that the government may not repay its debts.

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

However, it had to pay more to borrow the money, a rate of 6.29%.

Now it is above 7% again - the rate at which Greece, Ireland and Portugal were obliged to seek emergency bailouts from the EU.

Over the weekend, parliament passed a package of austerity measures demanded by the EU with the aim of balancing the budget by 2014. The measures foresee 59.8bn euros in savings, from a mixture of spending cuts and tax rises.

 

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  • rate this
    +11

    Comment number 33.

    Italy is a Parliamentary Republic, meaning the core of its political system is the elected Parliament. It's the Parliament which chooses the PM (not direct elections). The President of the Republic merely designates a possible PM after hearing what the parties represented in the Parliament think. It's up to the PM-designate to gain acceptance with the Parliament by getting a confidence vote.

  • rate this
    +12

    Comment number 26.

    Just to get things straight, Italy does have an increbibly high debt (no merit of Berlusconi here) while our deficit is considerably better than other EU countries, including France and Germany. Secondly, Monti may be a technocrat but he is going to have to get his hands dirty with POLITICS if he wants to touch pension schemes, fight the lobbies, add considerable taxes etc. Good luck !!!

  • rate this
    +9

    Comment number 24.

    My parents as they live in italy and asked them what they thought. They said people don't mind paying more tax, but in line with that they want to see a tax called patrimoniale which is a tax on the rich based on what they own. If this is applied to the 10% of the richest people in Italy would bring in 200 billion a year if applied to the top 1/3 it brings in 600 billion. Berlusconi, Lega say no

  • rate this
    +5

    Comment number 21.

    Mr Monti is walking a tight-rope focussing his attention on deft economic, monetary policies without getting bogged down by petty politics. But politics is at the heart of the matter as politicians from right and left wanting to score points even when the country's enonomy is in dire straits. A new realism has to sink in. Mr Monti is the best person to inject the right prescriptions to save Italy

  • rate this
    +3

    Comment number 15.

    In times of plenty countries run themselves and Prime Ministers are primarily chosen for their media skills, not their economic skills.
    Current economic problems effectively override politics.
    Hopefully the Italian public along with the Greeks will recognise the problems and not be an obstacle to recovery.

 

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