Europe

Italy crisis: Debt cost puts pressure on Mario Monti

  • 15 November 2011
  • From the section Europe
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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".

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.