Monti resigns

Italian PM Mario Monti resigns

Italian Prime Minister Mario Montihas resigned fter 13 months in office, as promised.

Former prime minister Silvio Berlusconi has already announced that he'll try to replace Monti in February's election.

Al Jazeera's Claudio Lavanga reports from Rome.

Monti's warning

And yet markets are up today...

EU's future in danger: Italian PM

Disagreements within the 17-nation euro area are undermining the future of the European Union, said Italy's Prime Minister Mario Monti as the stand-off on European Central Bank (ECB) support for Italian and Spanish debt hardened.

Today,

6 August, 2012

"The tensions that have accompanied the euro zone in the past years are already showing signs of a psychological dissolution of Europe," he told Germany's Spiegel magazine in an interview published yesterday.

"I can only welcome the ECB's statement that there is a 'severe malfunctioning' in the market for government bonds in the euro region. It's also true that some countries have to shoulder 'extraordinarily high' costs to finance their debts. That's exactly what I've been saying for a long time."

Mr Monti urged swift action to lower borrowing rates.

Investors and politicians are still grappling with the significance of comments on sovereign debt purchases by ECB President Mario Draghi last week. While markets initially tumbled last Thursday after Mr Draghi said Spain and Italy would have to formally request a resumption of the bank's bond buying, they rallied the following day as investors concluded that ECB action would occur, albeit on an unknown future date.

Spain's 10-year bond yield rose as high as 7.44 per cent after Mr Draghi's press conference, before ending the week at 6.77 per cent. Yields on Italy's similarly dated bonds rose to 6.28 per cent and ended the week at 6.01 per cent. That compares with 1.42 per cent for 10-year German debt.

Mr Monti said Italy was effectively helping German borrowing costs as the federal government benefited from its neighbours' rates. He told Spiegel: "The high yields Italy has to pay right now subsidise the low ones Germany is paying. Without that risk, the yields on German government bonds would be somewhat higher."

Spain and Italy meanwhile suggested that bailout requests may not be imminent or necessary.

Italy

Italy Trembling on the Brink

Wolf Richter www.testosteronepit.com

Zero Hedge,

13 June, 2012

“I believe, no,” is how Italian Prime Minister Mario Monti answered the question if Italy would seek a bailout—lacking the bravado and vehemence with which Spanish Prime Minister Mariano Rajoy had claimed for the longest time that Spain wouldn’t need one. Until it needed one. The question was hot. It followed the kerfuffle that ensued when Austrian Finance Minister Maria Fekter had let it slip Monday that Italy, given the high rates it has to pay on its debt, might also need “support.”

Monti was addressing restive German taxpayers on Bavarian public radio: He understood that Germans were looking at Italy as “a merry and undisciplined country,” but Italy was much more disciplined than other countries, he said, and wasn’t all that merry.

Italy is paying twice, he said: for the bailouts of other countries and very high rates for its own sovereign debt. Germany pays only once, namely for the bailouts, because it pays practically no interest on its debt. But he promised his German listeners: “The budget deficit this year will be low, only 2%.” And next year, a surplus is scheduled. “The country is changing,” he said.

A full-fledged bailout of Italy is a theoretical construct, anyway. As the third largest economy in the Eurozone, it’s too big to get bailed out by the Eurozone. Of the 17 member states, five, if Cyprus is included, are already being bailed out. Leaves 12, including teetering Italy, to pay for them. If Italy falls, the two major countries left standing to bail all of them out would be Germany and France. An impossibility.

And Italy is desperate. “Schnell, Frau Merkel,” screamed the front-page headline of the Italian business daily Il Sole 24 Ore.

“Hurry up, Ms. Merkel,” an open letter to German Chancellor Angela Merkel, was a plea to do what it would take to save Italy—and thus the Eurozone. “Great Germany is losing its sense of history ... and solidarity with European partners,” the article admonished, despite the hundreds of billions of euros that German taxpayers already committed to the bailouts. It called for immediate action, which would be in Germany’s own interest, and had “at least three” demands:

1. European-wide deposit insurance. Problem: it doesn’t exist yet, and no bank has paid into the fund; thus, it would be taxpayers, particularly Merkel’s voters, who’d have to transfer their wealth to bail out banks and depositors in other countries.

2. Give banks direct access to the bailout fund EFSF. Problem: it was sold to voters as a bailout mechanism for countries, not corporations.

3. Unification of bond yields via Eurobonds. Cost of borrowing would be the same for all countries, raising it for Germany and France, and lowering it for Spain and Italy. A bit “more complicated” to implement, it would require constitutional reforms of all countries as they would give up part of their national sovereignty. A “European constitution” would have to seal it. “Leaders in every country, including France and Germany, must have the strength to convince their electorates of the short- and medium-term benefits.”

And it threatened Germany with economic demise, having learned how to do that from Greece: “Germany cannot maintain its health and strength amid the debris of small and large European countries.” Wondrous benefits, on the other hand, would emerge from a political and fiscal union—run by bureaucrats in Brussels, I presume: Europe would suddenly become “a fierce competitor” that would be able to “ensure income and jobs for a new generation.” If not, “you”—that’s Ms. Merkel—“would be overwhelmed by a spiral of defensive interventions that jump from one country to the next.” And it concluded, “It’s clear to everyone that the United States of Europe is a reality....Faccia presto, signora Merkel.”

It would be a debt and transfer union. Debt would be transferred into one direction and wealth into the other—unless strict controls were instituted. If countries were to guarantee the debt of other countries, guarantors would have to be able to control how much can be borrowed; or else, Greece for example, could borrow cheaply and without limit while someone else would ultimately have to pay off its debt. So, any kind of common debt, be it Eurobonds or other instruments, would require a supra-national entity that decides to what extent a country is allowed to borrow.

Once the budget is in deficit, elected national representatives would lose their ability to fund infrastructure projects, boondoggles, subsidies, corporate handouts, wars ... a fundamental democratic activity, messy as it can be. Instead, they’d have to go begging to the board of bureaucrats who speak different languages and hail from different countries. That board would wield enormous power over each country as it decides what gets funded and what doesn’t, based on whim or political persuasion. National politicians do that too, but they’re part of the country and have to run for reelection.

The US had hundreds of years and a civil war to figure out how to manage its common good. The Eurozone is a group of 17 independent nations with ancient cultures. Uniting them into a federal arrangement will take decades, if it’s even possible. But the debt crisis is here now. Italy is running out of options. Spain is hopelessly in trouble. Greece has hit the wall. And turning that fiasco overnight into a healthy United States of Europe is an illusion.

In Greece’s chaotic wake bobs the Republic of Cyprus, the fifth Eurozone country to get a bailout. A massive banking scandal, tight connections to Greece, corruption, too much debt, and a lousy economy took it down. But tiny Cyprus has one thing—and it’s huge—that other debt sinner countries don’t have. Read.... Manna for Bankrupt Cyprus.

And here is the hilarious but brutally truthful video from down-under comedians Clarke & Dawe that in 2.5 minutes summarizes with superb accuracy the entire Eurozone debt crisis.

Greece and Italy

Analysis: Storm clouds gather over Monti's Italy reform drive

Storm clouds are gathering over Mario Monti's efforts to transform the Italian economy, with his approval ratings dropping, mounting protests against his reforms and a damaging row with the parties that sustain him in parliament.

News Daily,

29 March, 2012

Monti shot out of the blocks after being appointed prime minister in November and quickly implemented tough austerity measures to fend off the debt crisis. But he now risks running into political quicksand that will slow down and weaken the much harder task of reviving a notoriously stagnant economy.

A labor reform that is at the centre of Monti's program has hit heavy opposition, forcing him to abandon immediate implementation and accept a parliamentary debate that will delay the law for months and could lead to it being diluted.

The reform has also caused rifts in the centre-left Democratic Party, his second-biggest parliamentary backer, destabilizing the alliance on which he depends to govern.

Italy's borrowing costs, which fell sharply after Monti took power, have also begun to creep upwards recently, reflecting in part the increased political uncertainty.

The technocrat premier was widely criticized by both politicians and commentators in Italy on Thursday for an outburst against the parties from Japan, where he was on an Asian tour intended to drum up foreign investment.

Monti told reporters: "The government enjoys high support in opinion polls, the parties do not." This followed remarks in South Korea where he threatened to step down if the parties and trade unions didn't like the job his administration was doing.

Both remarks betray Monti's irritation at political sniping and opposition to his measures, particularly the key labor reform. They also mark a departure from the statesmanlike demeanor he adopted earlier in the year when he never lost an opportunity to laud the parties' sense of responsibility.

Judging from reaction on Thursday, the previous approach was more prudent, and the former European Commissioner may have overplayed his trump card - the extreme reluctance of the parties to lead a government that must take painful and unpopular measures to ward off financial disaster.

"This muscular exhibition risks compromising the good things achieved so far by this government, backed by responsible political parties," commentator Pierluigi Battista said in a front-page editorial in the respected Corriere della Sera daily.

Democratic Party (PD) leader Pier Luigi Bersani, under heavy pressure from the party's left wing over the labor reform, quickly shot back at Monti, underlining the interdependence between technocrats and politicians.

"Either politicians and technocrats convince the country together or ... we will all get a kicking," Bersani said.

DEBT CRISIS

Monti was appointed as Italy tottered on the brink of a Greek-style debt crisis and politicians suffered widespread contempt for failing to head it off.

But to govern, he is dependent on a grand political coalition stretching from the centre-left to the centre-right.

Monti's irritability may reflect a drop in his approval ratings because of the labor reform, intended to free up a sclerotic dual system that gives cast-iron protection to older workers on permanent contracts while condemning many young people to endless temporary contracts without benefits.

Most Italians do not seem to believe Monti's assertion that a reform making it easier to fire people will also create a fairer jobs market. A poll on Sunday found 67 percent of people opposed the measure.

The same poll showed Monti's support falling to 44 percent last weekend from 62 percent in early March, although another poll on Wednesday registered a more modest drop to 55 percent this month from 59 percent in February.

Nevertheless, his approval is way higher than that of the major parties, whose ratings are still below 30 percent.

Monti's problems also reflect two other factors, one an ironic consequence of his own success, and the other a signal of the return to centre stage of politicians who were cowed by the economic emergency but are now vying to retrieve some of their support in local elections on May 6-7, the first substantial electoral test since the technocrat government took power.

Monti's major prestige abroad, his sobriety and obvious expertise have contributed to a slide in Italy's borrowing costs from an untenable level above 7 percent in November to more manageable levels of around 5 percent.

This reduced the pressure for politicians to go along with his reforms and also encouraged trade union opposition.

GENERAL STRIKE

The biggest union, the leftwing CGIL, has threatened a general strike against the labor reforms and all the three main union confederations have announced a joint protest on April 13 against a pension reform that was passed in December to muted opposition and is seen by many as Monti's biggest achievement.

Monti's problem is that the easing of debt pressure and his own stumbles over the reform have left space for a revival of political squabbling between the grand coalition's right and left, which will make future reforms more difficult and revive anxiety in financial markets already on edge about Spain's economic difficulties.

Parliamentary debate on the labor reform is likely to see the PD trying to weaken the changes and the centre-right People of Freedom (PDL) party of former Premier Silvio Berlusconi pulling in the opposite direction.

The PDL, backing the position of employers, opposes any changes and says the bill should have been implemented immediately. But if there are changes, it says they must be balanced between right and left, risking prolonged debate.

None of this suggests Monti's days are numbered, only that they may be a great deal more difficult from now on.

With a general election in a year, the parties struggling to overcome their low public esteem and a crisis of identity caused by Monti's wind of change, none want to risk toppling him and provoking a new market storm.

In addition, there is almost no chance of an election now being held before next spring - the season when Italian polls traditionally take place. All sides swiftly denied a recent rumor that there could be a vote in the autumn.

So Monti will no doubt soldier on out of a sense of duty, with the constant danger that his difficulty in passing deep reform will again upset the markets and reverse the progress he has made in restoring respect for Italy.

Greece May Have to Restructure Again, S&P’s Kraemer Says

Greece will probably have to restructure its debt again and this may involve bailout partners such as European governments, said Moritz Kraemer, head of sovereign ratings at Standard & Poor’s.

Businessweek,

28 March, 2012.

There may be “down the road, I’m not predicting today when, another restructuring of the outstanding debt,” he said at an event in London late yesterday. “At that time maybe the official creditors need to come into the boat.”

Speaking at the same event at the London School of Economics, Poul Thomsen, the International Monetary Fund mission chief to Greece, said while Greece has made an “aggressive” fiscal adjustment, it will take at least a decade to fully complete the country’s reforms.

Caretaker Prime Minister Lucas Papademos won parliamentary approval on March 21 for a second 130 billion-euro ($173 billion) rescue program. Passage of the legislation moves the country a step closer to elections that may be held as early as next month. Greece pushed through the biggest sovereign debt restructuring in history earlier this month, paving the way for the bailout.

Thomsen said that after the elections, there is “no doubt it will have to reduce its fiscal deficit.” He also said it’s not clear when Greece will be able to return to markets.

“It remains uncertain, with this high level of debt and the risks the program faces because of possible resistance to reforms, when market access will return,” he said. “There’s no room for manoeuver or policy slippage.”

Rescue Funds

The euro rose 0.1 percent against the dollar today and traded at $1.3334 as of 8:06 a.m. in London. It was little sovereign ratings at Standard & Poor’s.

Italian Prime Minister Mario Monti said this week that the euro area’s woes are “almost over” after a slow initial response by policy makers. Still, European governments are preparing for a one-year increase in the ceiling on rescue aid to 940 billion euros ($1.3 trillion) to keep the debt crisis at bay, according to a draft statement for finance ministers.

The euro-area finance chiefs will probably decide at a meeting tomorrow to run the 500 billion-euro permanent European Stability Mechanism alongside the 200 billion euros committed by the temporary fund, a European official said yesterday.

Temporary Fund

Beyond that, they are also set to allow the temporary fund’s unused 240 billion euros to be tapped until mid-2013 “in exceptional circumstances following a unanimous decision of euro-area heads of state or government notably in case the ESM capacity would prove insufficient,” according to the draft dated March 23 and obtained by Bloomberg News.

Thomsen said that while Greece’s fiscal adjustment has been “unprecedented, very impressive, and undoubtedly socially very painful,” a “major adjustment is still needed, of 6-7 percent of gross domestic product.”

Kraemer said that the priority some creditors have been claiming, such as the European Central Bank, is complicating the ability of Greece to lower its borrowing costs and be able to return to bond markets.

“More and more official creditors have been jumping the queue and becoming so called preferred creditors, which means in the case of a restructuring they do not participate,” he said. For “the regular bond holders, the risk increases significantly. That means that the investor will demand a higher interest rate from Greece and that makes it harder for Greece and other countries on the periphery to establish a sustainable debt trajectory going forward.”

Monetary Union

Kraemer said that while making adjustments in a monetary union is “more difficult,” it’s not an impossible task “if the political preconditions and flexibility are there.”

European officials said this week that Greece must step up efforts to tighten the budget and overhaul the economy to prevent the second bailout from collapsing.

“Without a regime change in policy implementation and a much broader political consensus in favor of painful but necessary reforms, there is a high risk that the program derails,” ECB Executive Board member Joerg Asmussen said. “Political courage is needed more than ever.”

Asmussen’s comments were echoed by EU Economic and Monetary Affairs Commissioner Olli Rehn, who said that “challenges remain” as Greece seeks to cut its debt to around 116 percent of gross domestic product in 2020 from more than 160 percent of GDP last year.

Two men torch themselves in Italy as hardship bites 

A Moroccan worker in Italy set himself on fire on Thursday in protest at not being paid for months, a day after an Italian businessman set himself alight over a tax dispute, police said

News Daily,

29 March, 2012

The 27-year-old construction worker is recovering in hospital after dousing himself in petrol and lighting it outside Verona city hall in northern Italy, police said.

Police said the man told them he was desperate after not being paid for four months and running out of money.

On Wednesday, a 58 year-old businessman tried to commit suicide by setting himself on fire in his car outside a tax office in nearby Bologna. His appeal against a demand for thousands of euros in allegedly unpaid taxes had been rejected, according to Italian media reports.

He is being treated in hospital for severe burns.

The government of technocrat Prime Minister Mario Monti is cracking down on tax dodging, which authorities estimate deprives Italy of an around 120 billion euros ($160 billion) a year.

Unions say austerity measures, including tax hikes, spending cuts and pension changes, weigh disproportionately on ordinary workers.

Vincenzo Scudiere from Italy's CGIL trade union said the construction worker's self-immolation was a "symptom of the utter exasperation felt by the weakest employees," and warned the government not to underestimate discontent among workers.

The government presented labor reforms last week which face tough opposition from unions that are planning protests and strikes against measures that will make it easier to fire staff.

Sandro Bondi from the large centre-right People of Freedom party said the crisis spared neither workers nor bosses.

"The tragic tale of the businessman ... should help people realize that the divisions between workers and businessmen are a fantasy of the past," he said.

Italy: protests against bankster PM

"Lest we forget about Europe.

Protests against Italy's Monti rising

Italy's three main trade union federations will hold a joint protest rally against Prime Minister Mario Monti's economic reforms on April 13, the head of the country's largest union, Susanna Camusso, said on Tuesday.

News Daily,

28 March, 2012

The proposed labor reforms, including changes which would make it easier for companies to fire workers, have already prompted the CGIL union to call a general strike, although no date has been set.

Monti, appointed in November as market turmoil threatened to engulf Italy in a Greek-style debt crisis, has pledged to push through far-reaching reforms to the euro zone's third largest economy before new elections in 2013.

His efforts to kickstart growth needed to reduce Italy's debt mountain are being closely watched by financial markets and by its euro zone partners, who could not afford to bail out the country if it lost access to international markets.

Next month's rally has been called to protest against pension reforms which have already been passed and the unions have still not decided a common line on the labor reform issue, but Camusso said there was deep discontent over the proposals.

"The situation in Italy is very serious and Italians are nearing their limit," Camusso told a meeting with foreign journalists in Rome. "Our country is living in fear."

The other two federations, the CSIL and the UIL, have criticized parts of the reforms but the CGIL is the only one of the three big labor groups planning to strike against changes it says will lead to "easy firing".

UILM, the engineering section of the UIL federation, said on Wednesday it would hold a four hour strike of its own, however.

The union campaign will come as the reform bill goes through parliament, where the centre-left Democratic Party (PD) has pledged to defend provisions that guarantee reinstatement for workers deemed to have been unjustifiably laid off.

That has pitted it against the centre-right PDL party, which also backs Monti's unelected government of technocrats but which wants to see the reforms passed unchanged, increasing political tensions ahead of city council elections on May 6-7.

The local balloting will be the first test of voter support for the parties since they agreed to back Monti four months ago in a bid to shore up investor confidence.

SAFEGUARD

The job protection measure that Monti's reform would alter dates back to the height of 1970s labor power in Italy and is known as Article 18 of the labor statute.

The proposed change to job protection rights is just one part of a package of labor reforms, but has come to symbolize a battle over the future of industrial relations in Italy.

Camusso said the change the PD wants to make to the proposal would make the overall package acceptable to the CGIL.

"If parliament comes up with a solution that includes reinstatement as a deterrent for all the motivations used to fire workers, then we will be able to say that we've safeguarded the fundamental spirit of Article 18," Camusso said.

Monti was appointed in November to succeed scandal-plagued premier Silvio Berlusconi amid financial market turmoil that saw Italy's borrowing costs shoot up to unsustainable levels. Mounting resistance to the labor proposals has since dented his approval ratings.

A survey by IPR polling company published on the left-leaning La Repubblica daily's web site on Wednesday showed his approval rating falling from 59 percent to 55 percent in the space of a month.

The reforms are intended to overhaul labor market rules that offer iron-clad guarantees to those on permanent contracts but leave a growing army of mainly younger workers condemned to a succession of insecure, temporary jobs.

The government says the rules have contributed to the low level of Italians in full-time employment because they discourage companies from taking on permanent staff who are then difficult to lay off in lean times.

Italy unveils government of technocrats

This is an unelected cabinet of "technocrats" - essentially a takeover by the banksters, or the New World Order..... until the Italian (and the European) economy completely collapses

Italy's new prime minister, Mario Monti, confirms he will take on task of governing Eurozone's most indebted nation

the Guardian,

Wednesday 16 November 2011 13.16 GMT

The former European commissioner, Mario Monti, has unveiled Italy's new government and told Italy's president, Giorgio Napolitano, he was ready to test its support in parliament.

Monti, a distinguished liberal economist, kept for himself the finance ministry. He handed the industry and infrastructure portfolios to Corrado Passera, the CEO of Italy's biggest retail bank, Intesa Sanpaolo.

The dominant note in the list Monti read out was the weight of academics, who will occupy more than a third of the seats in cabinet. Three of the ministers in his bigger-than-expected cabinet were women, and two were appointed to top jobs: Anna Maria Cancellieri as interior minister and Paola Severino as justice minister.

The new prime minister, Monti, confirmed he would take on the unenviable task of governing the eurozone's most indebted nation after two days of intense consultations during which Italy's borrowing costs soared to unsustainable levels.

The uncertainties surrounding the formation of the new government were maintained to the end by a much longer than expected two-and-a-half hour meeting between the incoming prime minister and the president.

The names on the list of his ministers — most of them unknown to members of the Italian public — showed that Monti had failed in his attempt to involve party representatives in his government. His government was made up exclusively of non-aligned technocrats.

But the economics professor-turned-eurocrat managed to stave off — at least temporarily – demands from the outgoing prime minister, Silvio Berlusconi, and his party, for the government to have a limited programme and a fixed lifespan. The influence that Berlusconi's Freedom party will exercise over the new government was nevertheless made clear in the runup to Wednesday's announcement. Monti spent three hours at a meeting that finished after 2.30am local time, with Angelino Alfano, the secretary of Berlusconi's party, trying to reach agreement on the names of the new ministers. Berlusconi was ousted after losing his majority last week in the lower house of parliament, the chamber of deputies. But he and his former coalition allies in the Northern League can still command a majority in the senate.

Before the end of the week, the government is expected to outline its programme and seek confidence votes in both houses of parliament, without which it cannot continue. Napolitano, who oversaw the rapid transition, asked Monti to try to form a government on Sunday night.

Change of guard in italy

Mr. Monti is like his Greek counterpart, Mr Papademos, a technocrat who is well-equipped to  
remove democracy and national sovereignty in Italy.  No doubt he will serve the interests of the Bilderberg Group and the banksters well.

Mario Monti replaces Berlusconi as Italian PM

Economist and former European commissioner appointed to pick members of emergency government after Berlusconi resigns.

Al Jazeera,
13 November, 2011

Italy's head of state has appointed economist and former European Commissioner Mario Monti to succeed outgoing Prime Minister Silvio Berlusconi and handle a crisis that has brought the eurozone's third largest economy to the brink of financial disaster.

Giorgio Napolitano, the Italian president, made the appointment on Sunday after talks with leaders of the two houses of parliament.

Monti must now draw up a caretaker cabinet and government of technocrats, lay out his priorities and determine whether he has enough support in parliament to govern effectively.

The announcement on Sunday followed celebrations in the streets of Rome over the departure of Berlusconi, who faced a chorus of jeers and insults as he was driven to the Quirinale Palace to hand his resignation to Napolitano on Saturday.

In a video message televised on Sunday, Berlusconi said he was pleased that the government had passed a budget vote in record time with more than 50 per cent of the reforms that were asked by the eurozone, in a demonstration that Italy will and can fulfil the measures as needed by its European partners.

He said that was a sign that he had honoured the confidence electors had given his party in 2008.

"Following the approval of the law, I have tendered my resignation as president of the council of ministers. I have done it so Italy could avoid being attacked by financial speculation," he said.

Berlusconi:

"...So it has been very sad to see my responsible, generous gesture being welcomed with booing and insults.

"But for the hundreds of demonstrators on the street, they should know we have done all we could to preserve our families from the global crisis that has hit Europe."

Pietro Paganini, a political commentator, told Al Jazeera that Berlusconi had "certainly not left behind an attractive legacy".

"Hopefully a new government will first give Italy credibility, which is what the markets demand."

For article GO HERE

Pressure on the ECB grows as Mario Monti rides to rescue

The European Central Bank (ECB) is under intense pressure to step up purchases of Italian bonds after premier Silvio Berlusconi finally relinquished power in Rome, clearing the way for former EU commissioner Mario Monti to form an emergency government of technocrats.

By Ambrose Evans-Pritchard, International Business Editor

9:14PM GMT 13 Nov 2011

the Telegraph,

13 November, 2011

The "halo effect" of Mr Monti helped bring Italian bond yields back from the brink of a catastrophic spiral on Friday but the gains are likely to be tested again as the new team faces the stark reality of Italy's fractured politics.

"The ECB must make it clear that it will not allow Italy's bond yields to rise above 5pc, however much it costs," said Thomas Mayer, chief economist at Deutsche Bank.

He described the current policy of half-hearted bond purchases as "a recipe for failure", signalling to markets that the ECB is not willing to see the job through with overwhelming force.

Britain's Business Secretary, Vince Cable, echoed the calls for bolder action, blaming the ECB's passive stand for the dramatic escalation of the crisis last week that pushed Italy's €1.8 trillion to brink of meltdown and spread contagion to France.

"The central bank has to have unlimited powers to intervene to support economies, and indeed banks, to prevent collapse," he told the BBC.

"It's very clear that in addition to the disciplines that the southern Europeans are going to have to adopt, the Germans are going to have to play their role in supporting the eurozone. That's either directly or through the central bank, making absolutely sure that the big countries that are subject to speculative attack are properly supported with adequate liquidity."

The EU's €440bn rescue fund (EFSF) is supposed to take the baton from the ECB so it can step back, but the fund is not yet ready and is itself struggling to raise money at a viable cost.

The replacement of Mr Berlusconi with a credible leader committed to the deep reforms demanded by the EU makes it much easier for the ECB to justify help for Italy, but it is far from clear that the bank is willing to give Mr Monti a "dowry" of lower borrowing costs to lighten his task.

Jens Weidmann, head of Germany's Bundesbank and a pivotal ECB governor, has further dug in his heels against any extension of bond purchases.

"We have a mandate and we have to stick to our mandate. Fixing an interest rate for a country is certainly not compatible with our mandate," he said over the weekend.

"The eurosystem must not be a lender of last resort for sovereigns because this would violate Article 123 of the EU treaty. I cannot see how you can ensure the stability of a monetary union by violating its legal provisions."

Investors are betting on a torrid relief rally across global asset markets this week on hopes that new leaders in Italy and Greece will at least break weeks of deadlock, but it is already clear that politics will remain messy.

Mr Berlusconi warned that his People of Liberty Party intends to exercise a de facto veto in Italy's Senate, maintaining its grip on power behind the scenes.

"We are ready to pull the plug," Mr Berlusconi allegedly told supporters. He aims to block any form a wealth tax or bank account levy.

Mr Monti faces a difficult task, forced to work with shifting alliances and bitterly opposed parties on one issue at a time.

"We won't give you a blank cheque," said Umberto Bossi from the Northern League.