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Market sentiment in Italy improves as new premier Monti races to build new government
ROME (AP) ' Italy's premier-designate Mario Monti began talks on Monday to create a new government of non-political experts tasked with overhauling an ailing economy to keep market fears over the country from threatening the existence of the euro.
In a vote of confidence in Monti and his ability to quickly form a new government, the Italian government's borrowing rates on the secondary bond market sank.
Silvio Berlusconi resigned as premier this weekend, as promised, after both houses of Parliament passed emergency austerity and reform measures with unusual speed, within two days.
President Giorgio Napolitano tapped Monti on Sunday to create a government capable of implementing economic reforms aimed at reviving stagnant growth to bring down public debt, stuck near 120 percent of GDP.
Napolitano emphasized that the task is urgent, noting euro200 billion ($273 billion) in public debt comes due through the end of April.
On Monday, the yield on the benchmark 10-year bonds was at 6.28 percent ' after spiking last week well above the 7-percent level that eventually forced three other eurozone countries to need bailouts. The yield is indicative of the rate the government would pay if it were to tap financial markets to raise cash.
A test of market sentiment will come later in the day, when Italy will auction up to euro3 billion ($4.1 billion) in five-year bonds.
Monti said Sunday that he would act "with a sense of urgency" to identify ministers in the new government but said he would also take the time necessary to secure a strong team. He will be meeting with various political parties throughout the day to garner support for his mission.
"In a moment of particular difficulty for Italy, in a troubled global and European context, the country must win the challenge to redeem itself. Italy needs to return to being an element of strength and not weakness in the European Union, of which we were founders and in which we need to be protagonists," Monti said.
Monti must now draw up a Cabinet, lay out his priorities, and see if he has enough support in Parliament to govern. Rival political parties offered various degrees of support, including one demand from Berlusconi's party ' the largest in Parliament ' that his government last only as long enough as it takes to heal Italy's finances and revive the economy.
The 68-year-old economics professor proved his mettle as European competition commissioner in the 1990s. But he'll have to win a confidence vote in Parliament before he can lead the nation.
But Berlusconi pledged to continue playing a role in Italian politics.
"Berlusconi made his position very clear when he left on Sunday. He sent a video message to Italy saying that he is not finished, " said James Walston, a political analyst at the American University of Rome. "So at the moment he is certainly not retired, he is not the retiring type."