Mario Monti

Italy In Preliminary Talks With IMF About Financial Support

Italy has held preliminary talks with the International Monetary Fund (IMF) about financial support to help them deal with the euro zone’s debt crisis. There’s even been talk of it being co-funded by national European central banks, but as of right now no decision has been made according to several sources close to the discussions.

Mario Monti, the new Italian Prime Minister, briefed EU finance ministers on Italy’s fiscal plans during the EU minister meeting yesterday. No formal request has been made for IMF assistance yet but sources say this may happen after he presents his budget to Italy’s cabinet on December 5.

Sources close to the situation say that talks between Italy and the IMF have been going on for weeks, but quickened last week after Germany said the European Central Bank (ECB) could not directly assist Italy. “Discussions are currently around a 400 billion euro ($530.6 billion) contingency package. Italy has not filed a request but things are building in that direction,” the source said.

Other banks may have to help out since the IMF only has $380 billion available to lend to all countires. The IMF has denied talks are going on and their statement reads, “The IMF wishes to reaffirm that there are no discussions with the Italian nor Spanish authorities on any form of IMF financing.”

These talks come as many economists believe the Euro Zone is entering into a crucial 10 day period to save itself.

“We are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union,” said Economic and Monetary Affairs Commissioner Olli Rehn as EU ministers met yesterday.

Stocks are poised to open higher today with futures for the major indexes up more than 2%.

Mario Monti Tapped To Head Italy’s Government

Mario Monti, a former member of the European Commission, was tapped by Italy’s president, on Sunday to form a new government, a day after the passage of a debt-cutting budget bill and the resignation of Prime Minister Silvio Berlusconi.

Monti will head a new technocratic government aimed at implementing austerity measures and other reforms to get control of Italy’s ballooning debt. President Giorgio Napolitano formally chose Monti after a day of meetings with political leaders across the spectrum, almost all of whom had pledged their support for a government of technocrats to guide Italy’s post Berlusconi future.

The leader of Berlusconi’s People of Liberty party said that the party would support a Monti government for only as long as it could fulfill its mandate to push through measures to help reduce Italy’s $2.6 trillion public debt and increase growth to keep the country competitive. The party had been pushing for early elections, and media reports said that Mr. Monti hoped to serve until the end of the current legislature in 2013.

Monti is a leading economist, Monti is among the most respected men in the country and the most admired Italians in Europe. Monti, 68, is multilingual and moves easily among European capitals. He is currently the president of Milan’s prestigious Bocconi University, he spent 10 years at the European Commission, about half in the powerful post of competition commissioner, and is one of the founders of the Brussels-based Bruegel think tank, which blends research with policy recommendations.

Monti earned an economics and management degree at Bocconi and later studied in the U.S. at Yale. Monti spent years teaching economics at several Italian universities. He is recognized as a champion of the free market and reduced government spending, who has been influential in setting European and international antitrust standards.

With a herculean task before him, Monti is expected to dive right in to get the job done. he is respected by both the left and the right which will give him the ability to negotiate some treacherous waters.

Stock Futures Drift On Euro Zone Fears

U.S. stock-index futures drifted lower Monday as investors looked to Europe once more with bewilderment, wondering if the new Prime Minister of Italy, Mario Monti can hold Italy together long enough to get its debt under control. The concern with Greece is still there and not going away anytime soon.

Futures on the Dow Jones Industrial Average fell 38 points to 12,074. Standard & Poor’s 500 Index futures lost 7.2 points to 1,254.40, while Nasdaq 100 futures fell 9.75 points to 2,340.50.
Investors in Europe are keeping a close eye on Italian-government-bond yields. Last week, the yield on 10-year bonds spiked above the crucial 7% level viewed as unsustainable amid political turmoil and a margin increase before drifting lower.

“Despite the initial optimism over the new Italian government, Italy’s debt auction was a mixed bag and economic data suggest the region is tipping into recession,” wrote economists at Bank of America Merrill Lynch as U.S. stock futures turned lower.

Italy’s parliament over the weekend approved additional austerity measures and economic reforms. Silvio Berlusconi formally resigned as prime minister, with Mario Monti tapped to head a new technocratic government.

On Monday morning, Italy sold 3 billion euros ($4 billion) of five-year Italian government bonds. The yield rose sharply to 6.29% from 5.32% in a sale last month, but the yield remained below the level seen in the secondary market ahead of the sale and attracted stronger demand.

The benchmark Stoxx Europe 600 Index dropped 1.1% to 238.24 at 12:29 p.m. in London as all 19 industry groups declined. The MSCI Asia Pacific Index rose 1.1%.

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