Monti confident despite market alarm

Italian prime minister designate Mario Monti vowed to unveil a new government Wednesday that will be able to overcome the debt crisis, as bond rates hit dangerous highs and Europe held its breath.

The former Eurocrat was scheduled to meet President Giorgio Napolitano at 1000 GMT before he is officially sworn in. There will then be a handover ceremony with the colourful outgoing premier Silvio Berlusconi.

Monti spent Monday and Tuesday locked in talks with political leaders, trade unionists and business associations, as well as representatives of women's and youth groups to try to build a consensus behind painful reforms.

At the close of the negotiations, the 68-year-old economist said he was "absolutely convinced in the ability of our country to overcome such a difficult period" and would unveil his new government "within hours".

He called for "economic, social and civil growth that is stable and long-lasting" and said the leaders of Italy's powerful trade unions had offered to make "possible partial sacrifices" for the greater good.

Berlusconi infuriated trade unions when he promised EU leaders he would overhaul labour laws to ease firings -- a reform that has long been on a list of liberal proposals to boost the country's anaemic growth rate.

The ex-commissioner -- who famously won cases against US giants Microsoft and General Electric -- has warned that Italians face "sacrifices" ahead but has also said he will struggle for "social equity" and "a true civil society".

Technocrat Monti is widely respected but has never held political office.

"Monti is our last chance to become credible again," Emma Marcegaglia, head of the main employers' group Confindustria, said after meeting him on Tuesday.

Raffaele Bonanni, leader of the CISL trade union, said: "Monti told us that he has reached a deal with the main political forces."

But La Repubblica daily said Monti was "concerned his government may find itself without political sponsors and last only a few months."

The 68-year-old has said he wants his cabinet to stay on until 2013 -- the scheduled date for Italy's next elections.

Investors meanwhile piled the pressure on Monti with stocks in Milan closing down 1.08 percent and Italy's borrowing costs breaking through a 7.0-percent threshold that has set off alarm bells around Europe and beyond.

Monti has asked for investors to be patient after intense international lobbying for him to forge a cabinet and move urgently to tackle Italy's worryingly high 1.9-trillion euro ($2.6-trillion) debt.

Analysts said the new leaders of Italy and Greece had to act fast.

"Whilst the new governments led by reform-minded economists are seen as a good starting point for the reform process, implementation will at best take time," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

Lee Hardman at The Bank of Tokyo-Mitsubishi UFJ in London, said: "The market will need to be convinced."

The worst performer on the Milan exchange was aerospace and defence giant Finmeccanica, which plummeted 20.33 percent after the company unveiled a net loss of 324 million euros for the first nine months of the year.

That came a day after Italy's biggest bank UniCredit announced it had suffered a 10.64 billion euro loss in the third quarter and would cut 5,200 jobs by 2015 in a sign the country is far from shaking off the crisis.

There were scenes of joy in the streets of Rome at the weekend when Berlusconi resigned after a parliamentary revolt and a wave of market panic, but Italians are sobering up to an uncertain political and economic future.

President Giorgio Napolitano has said he wants the government to be in place by the end of the week and has warned of a need for urgency because 200 billion euros of Italian debt becomes due by April next year.

The European Union, which together with the International Monetary Fund is now auditing Italy under a newly-imposed monitoring mechanism, has backed Monti but warned Italy may need to approve more budget cuts.