ROME — Eager to win back confidence from financial markets, Italy’s president Sunday appointed economist Mario Monti to lead the country’s new government. The move came almost 24 hours after Prime Minister Silvio Berlusconi submitted his resignation amid widespread celebration on the streets of Rome.
President Giorgio Napolitano’s announcement sets the stage for Monti, a former European Union commissioner, to form a new technocratic government that will try to navigate Italy out of the debt crisis with austerity measures sought by the European Union. The EU is demanding Italy cut public spending, reform its pension and take other steps to reduce the nation’s $2.6 trillion public debt and spur growth in the world’s eighth-largest economy.
Italy has been at the eye of the eurozone’s debt storm in recent weeks, along with Greece, as investors grew increasingly anxious about Berlusconi’s leadership and the fractured Parliament’s capacity to come together on a package of economic reforms.
Berlusconi, 75, faced intense pressure to step down after Italy’s cost of borrowing jumped sharply. With another round of bond auctions coming up this week, Napolitano and other Italian leaders were keen to announce a new government leadership before markets opened Monday morning.
“The key is the conviction markets have in a Monti administration and its ability to enact reforms,” said Paul Donovan, a global economist at UBS Investment Bank in London. He said it’s likely investors will react positively but cautioned that it hardly means the EU’s debt crisis is over.