CERNOBBIO/BARI, Italy Italian business leaders expressed palpable relief on Friday at the European Central Bank's bold plan to buy bonds of debt-laden euro zone states like Italy but they warned the region's crisis was not over and pressure was now on governments to take action.
Bankers and other businessmen attending a high level conference on the shores of Lake Como all praised the ECB's move, but concerns were clear about Europe's political will to overcome the debt crisis and particularly at the deep uncertainty surrounding the next Italian government.
"The problem of financial stability has been temporarily resolved by the intervention of the ECB, but vigilance must be maintained," Franco Bernabe, chief executive of communications giant Telecom Italia (TLIT.MI), told reporters outside the closed-door annual Cernobbio conference.
"If any government abandons the road of reforms it would be quickly pulled back by market reality."
Speaking in the southern Italian city of Bari, Prime Minister Mario Monti said the next government must carry on the path of reforms.
"There needs to be an elected and long-lasting government," said Monti, who heads a government of unelected technocrats and will not stand for office next year. "Growth will come if we can change people's mentality."
As if to underline the risks, Italian center-right politician Renato Brunetta, who is close to former premier Silvio Berlusconi, denounced Monti's economic policies and said they must immediately be changed.
"We have suffered a mistaken policy for the last year. We must change it, and immediately, and return to democracy with politicians running the country," Brunetta, a minister in Berlusconi's last government, told reporters at the conference.
Monti replaced Berlusconi last November when Italy came close to a Greek-style crisis and is widely credited with pulling the country back from the brink.
But he will stand down when elections are held, probably next spring, and there is absolute confusion about what will follow, with politicians still squabbling even about what electoral law will be used.
The ECB bond-buying plan lifted global markets and the euro on Friday and pushed down the borrowing costs of euro zone strugglers Italy and Spain, the region's third and fourth biggest economies.
PRESSURE ON GOVERNMENTS NOW
Federico Ghizzoni, CEO of Unicredit (CRDI.MI) , Italy's biggest bank by assets, stressed the pressure on governments after Draghi's action.
"Today we know very clearly what is the position of the ECB. It was a very strong and clear decision for investors and the markets. Now the working plan is clear, the ball is in the court of European governments."
He added: "Without a commitment by governments to continue with austerity policies on one hand and growth on the other the European problem will not be solved."
His words were echoed by Enrico Cucchiani, head of retail bank Intesa Sanpaolo (ISP.MI), who told reporters the ECB had taken an important step and now European fiscal, economic and eventually political integration must accelerate. "None of this will be enough if each state does not do its homework."
Berlusconi was accused by Germany and other northern countries of reneging on reform promises a year ago and this is at the center of their concern that southern European states will not stick to unpopular debt-cutting measures if upward pressure on their borrowing costs is removed by the ECB.
Gianluca Garbi, CEO of Banca Sistema, said Monti should ask for help from euro zone rescue funds - something he is resisting and which would be unpopular politically - as a way of locking the country into painful reforms passed over the last year.
"Considering the total political uncertainty relative to the next elections, in the interests of the country we must bind ourselves to carrying out the reforms."
Announcing the ECB plan on Thursday, bank president Mario Draghi said countries would only be helped after they signed up to and implemented strict policy conditions. The help would be withdrawn if that process ended, he said.
Though elections are no more than seven months away, the country's main parties are struggling to regain credibility and their leadership is still in doubt. Monti reaffirmed he planned to return to being a university professor when his term ends.
Berlusconi's People of Freedom (PDL) party is struggling in opinion polls, trailing the center-left Democratic Party (PD) and under threat from the populist Five Star Movement of comedian Beppe Grillo.
But Berlusconi is planning a comeback and the PDL could be part of a future coalition government, so Brunetta's remarks are unlikely to reassure investors about the future.
"This country is suffering a brutal recession, the poisoned fruit of policies imposed by Germany on the Monti government under the threat of the pistol of the spreads," he said.
"Enough of the technocrat government. The blackmail has finished," he said. "The economic policy of the Monti government must change immediately or the country will die."
But Unicredit's Ghizzoni said any future Italian government would have little room to move away from Monti's reforms.
"There is not much space to change policy. I am pretty confident that what Monti is doing will continue," he said in a Reuters interview.
International economist Nouriel Roubini was also more confident about the durability of Monti's changes. "While people worry about electoral uncertainty in Italy, in my view there is probably not going to be much alternative to some variant of 'Montismo'," he told a news conference.