Italy's worried president steps in to calm markets

Wed Nov 9, 2011 3:57pm EST
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By Barry Moody

ROME (Reuters) - Italy's president stepped in to try to calm markets on Wednesday after the country's borrowing costs raced to catastrophic levels, saying urgent action would be taken to end a political crisis.

Head of state Giorgio Napolitano, expressing alarm about a collapse in market confidence, said there was no doubt about the resignation of Prime Minister Silvio Berlusconi once economic reforms were implemented by parliament within days.

When a financial stability law incorporating the reforms promised to European leaders was approved, Napolitano said he would rapidly hold consultations to end the crisis.

"Therefore, within a short time either a new government will be formed ... or parliament will be dissolved to immediately begin an electoral campaign," Napolitano said.

The president, who has played an increasingly active role in the crisis, said he had been obliged to issue his statement because of the pressure on government bonds, whose yields shot above a "red line" of 7 percent on Wednesday.

In a possible sign that he was preparing the way for a so-called "technical government" led by an independent outsider, Napolitano named former European Commissioner Mario Monti as senator for life.

Monti has been widely seen as the most likely leader of a government of technocrats to implement vital economic reforms and steer Italy through to new elections in 2013.

Markets have been clamoring for weeks for Berlusconi to depart because of his failure to push through painful austerity measures and disarray from a rebellion inside his own party.   Continued...