ROME (AP) — Italian borrowing rates eased slightly on Thursday but remained well above the dangerous 7 percent mark after the president vowed to accelerate reforms for Premier Silvio Berlusconi's imminent resignation.
President Giorgio Napolitano assured investors that Berlusconi will step down after reforms are passed — likely by Saturday — and he named respected economist Mario Monti senator for life in a move that puts him in line to run the next government.
Italy is under intense pressure to prove it has the political will to take measures to increase confidence that it can repay its debts, which stand at a huge 120 percent of economic output. But economic growth is weak and the government has been incapable of pushing through reforms to revive it over the past decade.
Investors are worried that if Italy's borrowing rates remain too high for too long, it will be blocked out of financial markets and need rescue loans to repay its bondholders.
The yield on the benchmark 10-year bonds was up at 7.35 percent on Thursday, well above the threshold that forced Greece, Ireland and Portugal to seek bailouts, before easing back down to 7.18.
Italy's leading business newspaper summed up the growing sentiment with an enormous bold-faced headline: "Hurry Up."
In a key test, Italy later will sell euro5 billion ($6.8 billion) of 12-month bills. Yields are expected to be up sharply.
Indications that Monti, a leading economist who heads Milan's Bocconi University, would head a new government brought some relief, but many details still need to be worked out.
The elegant, gray-haired Monti, 68, made his reputation as a strong-willed economist when as EU competition commissioner he blocked General Electric's takeover of Honeywell.
Berlusconi's designated successor Angelino Alfano indicated on Italian TV that the premier would step down between Saturday and Monday, and that he would accept Monti. But the allied Northern League, a key element of Berlusconi's government, is staunchly opposed to a government of technocrats.
The main opposition parties appear to be in line to accept Monti as the head of a broad-based government of technocrats, however some more hard-line elements of the left, including unions and a smaller party, remain opposed.
Antonio Di Pietro, a former prosecutor who heads of a small left-wing party, said his party would not support Monti.
Financial chaos reverberated around the world, and investors pulled money out of Europe and stock markets fell.
Investors fear Italy might follow Greece, Ireland and Portugal into begging for a bailout from its partners in the euro. But Italy's euro1.9 trillion ($2.6 trillion) debt is far too great for Europe to cover.
Berlusconi announced Tuesday he would step down after Parliament passes a series of economic reforms to stave off financial ruin in Italy. But markets worried the tenacious premier will try to stay in power.
Parliamentary whips feverishly worked out a timetable to ensure that the Italian Senate would give final approval Friday to the package of measures, aimed at stimulating growth and reining in debt, according to state TV. It said the lower house would do the same on Saturday, meaning Berlusconi could be out before the weekend is over.