The changes in Italy and Greece along with the adoption of austerity measures to counter spiralling debt were heralded by markets and some European observers as positive steps to help solve the financial crisis.
Italy's ruling party selects new leader to replace Berlusconi
AMSTERDAM // The party of former Italian prime minister Silvio Berlusconi gave its support last night to a new government led by the former European commissioner Mario Monti.
Angelino Alfano, head of the conservative party, said the party's agreement was conditional on who is in the cabinet and details of the new government's programme. He also said it can only last just long enough to implement measures to save Italy from financial disaster.
Italy's president, Giorgio Napolitano, was expected to quickly tap Mr Monti to try to assemble a government before markets opened today.
The political changes in Italy and Greece, where an transitional government took over last week, along with the adoption of austerity measures to counter spiralling debt were heralded by markets and some European observers as positive steps to help solve the financial crisis that is rocking the euro single currency.
But internationally, much concern remained over the future of the euro zone. The British chancellor of the exchequer, George Osborne, yesterday told BBC television that only structural changes could save the single currency in its current form.
"The lasting answer is that the countries of the euro zone are going to have to cooperate much more closely on issues of tax and spending," he said, noting that this was the main reason Britain has stayed out of the euro zone.
The euro crisis was a focus for the US and other Pacific Rim economies at the Apec summit in Hawaii. Barack Obama, the US president, told reporters on Saturday that "there is still work to be done in the broader European community to provide markets a strong assurance that countries like Italy will be able to finance their debt".
Germany's chancellor, Angela Merkel, is said to be seeking rapid changes to the euro agreement, according to Reuters. "The government is pushing for a limited amendment to the treaty to allow greater influence over states that burst budget rules and agreed obligations on stability and consolidation," a source told the news agency.
But such measures do not go as far as the closer fiscal cooperation urged by Mr Osborne and others. And they are also likely to meet strong opposition in countries such as Greece, Italy and Spain where parts of the population have expressed deep distrust at the imposition of EU-demanded austerity.
After claiming the scalps of the Greek and Italian prime ministers in quick succession, the financial crisis is likely to bring about change in Spain. The socialist government of Jose Luis Rodriguez Zapateros is facing defeat by the conservative Partido Popular in elections on November 20 that were also brought about by austerity measures.
The departure of Mr Berlusconi, who had come to be seen as a liability by some because of his many scandals and his slipping support in parliament, may go some way towards reassuring markets in Italy for the moment. Mr Berlusconi told reporters that he felt "deeply embittered" as he was greeted by jeering crowds shouting "buffoon" and worse insults as he left the presidential palace after he had quit.
He resigned on Saturday night, as he had promised, after parliament approved a set of austerity measures in an attempt to stave off financial ruin. The cost of Italian borrowing briefly rose dramatically last week but has fallen back again as the political situation stabilised.
A majority of Italians support a new government headed by Mr Monti, an economist, wrote the La Stampa newspaper yesterday. According to a poll it cited by Istituto Piepoli, 58 per cent of Italians backed such a government while half said that it would be better than a Berlusconi government.
In Greece, the new transitional government headed by a former vice-president of the European Central Bank, Lucas Papademos, appeared to receive widespread backing. One poll, carried out by market research company MRB, put support at 75 per cent. Such high approval numbers in Greece and Italy could point at concerns over an economic meltdown trumping worries over outside, EU and IMF, interference in sovereign national affairs.
Like Italy, Greece is aiming to move quickly to reassure markets. Mr Papademos may get the confidence of parliament today and is likely to move on the implementation of austerity measures agreed at a European summit at the end of October later in the week.
* With additional reports by Associated Press and Reuters