Mario Monti's stock rises as Italy's 'moment of truth' arrives

Mario Monti appeared to be making good progress towards the formation of a new government as the president of the European council, Herman Van Rompuy, warned Italy was facing its "moment of truth". In early afternoon trading, the Milan bourse turned positive and the interest rate on Italian government bonds came down as encouraging signs mounted. They came after a sharp spike during the morning in the yields demanded for riskier eurozone debt pushed Italy's benchmark borrowing costs beyond the psychologically hazardous level of 7%. Altero Matteoli, a minister in Silvio Berlusconi's outgoing government, who had been among those demanding that stiff conditions be attached to a new, "technocratic" administration, abruptly changed the tenor of his remarks. "It seems to me now that the government is born," he said. His was the second positive comment to emerge from Berlusconi's party, the Freedom People (PdL). Its secretary, Angelino Alfano, had said that after meeting the prime minister designate, he thought: "Prof Monti's attempt to form a government can succeed." What was unclear was whether the PdL had extracted any concessions from Monti who, on Monday night, said he would not go ahead if a time limit were put on his government. A general election does not have to be held in Italy until spring 2013. The PdL originally floated two more demands. One was a narrow programme, restricted to the implementation of economic reforms and deficit-cutting measures agreed by Berlusconi with the European institutions. The other was the inclusion in the cabinet of the media tycoon's right-hand man, Gianni Letta, a former newspaper editor and Berlusconi executive. Italy's biggest opposition group, the Democratic party (PD), strenuously denied a report it had agreed to Letta's inclusion on condition that Monti also brought in a politician from the centre-left, Giuliano Amato.