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November 14, 2011

Italian PM Mario Monti seeks to form cabinet

Updated: 16:10, Monday, 14 November 2011

New Italian Prime Minister Mario Monti is due to hold “urgent discussions” on the formation of his cabinet, after being appointed last night by President Giorgio Napolitano.

It is believed that Mr Monti’s cabinet will consist of around a dozen members who are technical specialists, rather than career politicians.

The reaction of the bond markets this morning was key following a weekend of dramatic political developments which culminated in the departure of Silvio Berlusconi.

In a bond sale this morning, Italy paid higher rates compared to before the start of a political crisis.

However, the treasury managed to raise the €3.0 billion that it had expected to bring in with the five-year bond auction.

The rate was 6.29% compared to 5.32% for the last sale in October.

If Mr Monti manages to secure sufficient backing in parliament, he will implement reforms agreed by Mr Berlusconi with eurozone leaders to cut Italy’s massive debt and revive its chronically stagnant economy.

However, there are clear signs that he will face problems.

Angelino Alfano, secretary of Berlusconi’s PDL party, said there is “huge opposition” among some of its members to a Monti government.

However, Mr Alfano said after meeting Mr Napolitano yesterday that the party, which has been badly split by the crisis, would support Mr Monti.

But its agreement was conditional on the ministerial line-up and the policy programme of the new government, which must be based on reforms promised to Europe by Mr Berlusconi.

Asian markets and the euro have risen in early trade on hopes that new leaders in Italy and Greece will take decisive action to save their indebted nations from bankruptcy and avert a wider financial meltdown in the eurozone.

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