Italy's new premier rushes to build gov't

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.

Investors initially cheered Monti's appointment, following quickly on Silvio Berlusconi's weekend resignation, though concern lingered about the sheer amount of work his new government will have to do to restore faith in the country's battered economy and finances.

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 per cent of GDP.

Monti pledged to 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 was meeting various political parties throughout the day to garner support for his mission.

The head of the lower chamber of Parliament, Gianfranco Fini, said he expects the new Monti government to be confirmed by Friday.

The next six months will be a tough test of the Italian government's ability to restore credibility in its finances - some €200 billion ($273 billion) in public debt comes due through the end of April.

On Monday, Italy easily raised €3 billion (US$4.1 billion) in the sale of five-year bonds, though at a higher cost. Investors demanded an interest rate of 6.29 per cent for the bonds, the highest level since 1997, compared with 5.32 per cent at a similar auction a month ago.

On Monday, the yield on Italy's benchmark 10-year bonds fell as low as 6.28 per cent before stabilising around 6.40 per cent - still uncomfortably high for the country.

The yield is indicative of the rate the government would pay if it were to tap financial markets to raise cash.

Monti must now draw up a Cabinet, lay out his priorities, and see if he has enough support in Parliament to govern.

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.

Despite his resignation, 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.