The Italian Senate is rushing through laws to clear the way for establishing a new administration, tasked with rescuing the country from financial meltdown.
The man who many think will lead a new government of national unity is former EU Competition Commissioner Mario Monti. He is someone who the markets reportedly have faith in.
According to Italian media sources the current Prime Minister Silvio Berlusconi said on Thursday that his preferred option would have been elections, but that pressure from the markets won’t allow for such a delay.
That view is backed up by Luca Mezzomo, the Head of Macroeconomic Studies and Fixed Income Research at Intesa Sanpaolo Bank. “Political events remain key to the outlook for the country and for the government debt market. Unfortunately, it is not the only issue now. We are also seeing a sharp deterioration in real economic activity with worsening of business confidence and declines in industrial output,” he said.
Italy’s borrowing costs rose to an EU record high of 7.4 per cent earlier this week. It has since fallen to just below 7 per cent but many still see that level as unsustainable.