Ex-European commissioner Mario Monti came under intense pressure from financial markets yesterday as he rushed to form a new government within days to lead Italy out of an alarming debt crisis rocking the eurozone.
The technocrat launched talks with political leaders set to conclude today but has already won endorsements from Italy’s main parties and big business since being nominated to replace prime minister Silvio Berlusconi.
He is under intense pressure from the international community to fill the political vacuum in Rome and implement key economic reforms and according to newspaper reports is aiming to forge the Cabinet within 48 hours.
Italians may be forced to make “sacrifices” in the future, prime ministerial nominee Mr Monti warned yesterday, as he asked for patience from the financial markets while he scrambles to form a cabinet.
“I am not ignoring the importance of the markets but we are in a democracy and there is a certain time that is needed,” Mr Monti said after being locked all day in talks with political leaders to establish a new government. He said he wanted his government to last until 2013 – the year that elections are due – saying that a deadline on his government “would reduce the credibility of the government”.
“I would not accept a time limit,” he said.
After a positive start indicating investor approval of Mr Monti, Italian stocks moved into negative territory in line with falls on other European markets.
Among those worst hit was Italy’s biggest bank UniCredit, which announced it had suffered a €10.64 billion loss in the third quarter and will cut 5,200 jobs by 2015 in a sign the country is far from shaking off the crisis.
Borrowing costs on 10-year bonds fell to 6.352 per cent – below the seven per cent warning threshold breached last week, easing fears that Italy may follow Greece, Ireland and Portugal in needing a bailout. Italy also paid less in a five-year bond sale yesterday – 6.29 per cent, down from Friday’s 6.437 per cent – although the level was still far higher than before the start of the political crisis.
But an economics report from RBS Group bank said things in Italy were “still not moving quickly enough to quell fears about the collapse of the currency.”
The toxic mix of a €1.9 trillion debt, an extremely low growth rate and high bond rates are keeping markets anxious.
The Sole 24 Ore financial daily said the markets were very uneasy and “any delay in forming the Monti government could be extremely dangerous”.