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Italy’s new premier Monti rushes to build new government
Question of the Day
On Monday, the yield on Italy’s benchmark 10-year bonds fell as low as 6.28 percent in early trading but soon rose again to 6.70 percent — still uncomfortably high and not far from the 7 percent threshold that has pushed other eurozone countries to seek bailouts.
The longer these borrowing rates stay high, the more difficult it will be for Italy to reduce its huge debt pile.
That was apparent in a bond auction on Monday, when Italy raised euro3 billion ($4.1 billion) in the sale of five-year bonds at an interest rate of 6.29 percent, the highest level since 1997 and up from 5.32 percent at a similar auction a month ago.
Italy will need those borrowing rates to come down in coming months to avoid a big increase in its interest costs — some euro200 billion ($273 billion) in public debt comes due through the end of April.
“It will take years of unprecedentedly tight fiscal policy to get the public finances on a stable footing,” said Ben May, economist at Capital Economics.
Monti, a 68-year-old economics professor proved his mettle as European competition commissioner in the 1990s, has the support of investors and the EU, but several Italian parties were still attaching strings to their endorsement.
Berlusconi’s party — the largest in Parliament — demanded that his government last only as long enough as it takes to heal Italy’s finances and revive the economy. Berlusconi himself has pledged to continue playing a key role in Italian politics.
Antonio Di Pietro promised that his small Italy of Values party, which has been in the opposition to Berlusconi, “won’t block the birth of a Monti government.” But he made clear a commitment to make electoral reform a priority of the next government would weigh heavily when deciding whether to back Monti in the confidence vote.
He is also pushing for early elections once the electoral system is changed.
Some lawmakers, meanwhile, have been lobbying for representatives of all major parties to be part of the government, rather than having a Cabinet of technocrats.
Monti appeared to have the respect of many Italians, eager to see an end to the financial crisis that threatens their own well-being.
“In my opinion he will be better than what we had before, obviously. He seems to me to be a person who is serious, normal and with experience,” said Bernardo Albrigo, in the Campo Dei Fiori open-air market in central Rome.
• Barry reported from Milan.
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