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http://www.theaustralian.com.au/new...sconi-walks-away/story-e6frg6so-1226193948201
Italy faces race to halt the panic as Silvio Berlusconi walks away
From: The Australian
November 14, 2011 12:00AM
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Italy financial crisis
Italians celebrate Silvio Berlusconi's resignation outside the presidential palace in Rome. Source: AP
ITALIAN legislators are under pressure to form a new government today before panicked markets respond to the resignation of prime minister Silvio Berlusconi.
President Giorgio Napolitano began talks with political parties last night in the hope of giving his mandate for the formation of a new cabinet that will have to move quickly to push through painful economic reforms.
The talks, scheduled to last until this morning, were expected to name economist and former EU commissioner Mario Monti, 68, to lead Italy through its debt crisis.
Thousands of Italians gathered outside the presidential palace yesterday to witness the final minutes of the country's longest-serving prime minister since World War II.
Many yelled "buffoon, buffoon" as Mr Berlusconi - who won three elections and governed for more than half the 17 years since he entered politics in 1994 - drove to the President's residence.
Free trial
Celebrations broke out with people waving Italian flags and dancing upon his departure.
International leaders warned Italy against holding early elections after Mr Berlusconi's resignation, saying a prolonged political crisis in the eurozone's third-largest economy could drag down the entire euro area.
Markets have already given their blessing to the nomination of Mr Monti as prime minister, with borrowing costs easing from record highs and the stockmarket rallying as speculation intensified that he would be chosen.
Mr Berlusconi announced last week that he would resign after a parliamentary revolt left his centre-right coalition without a majority, and with a gradual loss of political support in recent months amid a wave of sex scandals and legal troubles.
But he set the precondition that the Italian parliament first had to approve a package of economic reforms that he had promised to the EU.
To reduce the country's debt of about $US2.6 trillion ($2.5 trillion), Italy's lower house of parliament, the Chamber of Deputies, approved an economic package that calls for raising the retirement age and selling real estate, among others actions.
The vote was 380-26. The Italian Senate had already approved the measure in a 156-12 vote, a move that saw European and US equities rally, while the euro turned higher.
Meanwhile, Greece's new Prime Minister, Lucas Papademos, held urgent talks with French President Nicolas Sarkozy and German Chancellor Angela Merkel on the bailout for his debt-hit country.
Mr Sarkozy and Ms Merkel underlined the need for Greece to implement the measures it had agreed to in return for the next instalment of an international loan, a statement from the French President's office said.
In separate talks, the French and German leaders "reaffirmed their determination to totally defend the euro", a statement said.
But Germany's Der Spiegel magazine, in a report due out today, said that Berlin had worked out contingency plans in the event that Greece had to quit the eurozone.
Ms Merkel was ready for the possibility Greece's new government may refuse to carry out the tough austerity program required of it in return for the next tranche of the EU-International Monetary Fund bailout, it reported.
Greece's new unity government faces a race against time to save the debt-stricken nation from bankruptcy after an historic power-sharing deal struck between opposing political parties.
Greek Finance Minister Evangelos Venizelos, who kept his job, said he hoped the latest slice of the bailout agreed for Greece would be paid soon after another EU finance ministers meeting on Thursday.
Agencies
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