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Economist expected to lead Italy’s interim government
Monti has experience in global finance, but not in politics
Question of the Day
ROME — Expectations that respected economist Mario Monti will lead a new interim Italian government helped calm market fears Thursday as the country was heading for a Greek-style crisis that would threaten the existence of the entire eurozone.
With a groundswell of Italian politicians voicing support for a technocratic government led by the former European Union competition commissioner, confidence grew that the transition of power from Premier Silvio Berlusconi will be swift.
As in Greece, where economist Lucas Papademos was appointed prime minister Thursday, there are hopes that Mr. Monti’s experience in global finance and his noninvolvement in partisan politics will help the country through market turbulence.
Italy’s 10-year borrowing rate slid sharply Thursday back toward levels that are considered manageable for now. On Wednesday, the rise in the 10-year bond yield to well above 7 percent stoked panic in financial markets that Italy was heading the same way as Greece, Ireland and Portugal and might need outside help.
“Professor Mario Monti wanted to express his heartfelt thanks” to the president for being named a lifetime senator, the palace said in a one-line statement.
Although Mr. Monti can only be named premier after Mr. Berlusconi hands in his resignation, his meeting with Mr. Napolitano will allow him to explain how he intends to command enough loyalty in the Italian legislature to ensure swift implementation of economic reforms needed to revive growth.
Mr. Berlusconi, arriving at the Senate, where the budget committee approved the reforms Thursday evening, was asked by reporters whether his splintering People of Freedom party could back a broad coalition government following his resignation.
“We’ll see,” Mr. Berlusconi said.
As hopes grew for a swift handover of power in Rome, the government easily sold $6.8 billion in 12-month bonds at an interest rate of 6.087 percent. Though that is up sharply from 3.57 percent in the auction last month, it was well below analysts’ expectations of 7 percent. Demand for the bonds was also strong, almost twice the amount on sale.
The European Central Bank has been buying up Italian and Spanish bonds in the secondary markets to help keep borrowing rates from becoming unsustainable. There’s speculation that the ECB was back in the markets Thursday trying to get Italy’s borrowing rates down. The ECB did not comment.
According to the EU’s latest forecast, which does not take into account the most recently promised reforms, Italy will still run a deficit of 1.2 percent of national income, with debt close to 119 percent of economic output.
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