* Monti seen getting job as early as weekend
* Politicians scramble to ward off crisis
* Bond yields ease on hope of solution
By Paolo Biondi and Barry Moody
ROME, Nov 10 Respected former European
Commissioner Mario Monti looked set on Thursday to be appointed
within days to head an emergency Italian government, as
politicians rushed to combat a crisis threatening the entire
Political sources said Monti could be appointed to replace
Prime Minister Silvio Berlusconi by Sunday and would then in
short order form a unity government comprised of politicians and
technocrats to push through a tough austerity programme.
Dithering politicians seemed finally to have been galvanised
into action after Italy's borrowing costs soared way above
sustainable levels on Wednesday, and earlier opposition to Monti
among ruling politicians was evaporating as they scrambled to
end uncertainty stoking the crisis.
Even Berlusconi, whose insistence on early elections after
he steps down had fuelled Wednesday's disastrous day on bond
markets, has been persuaded it would be better not to go to the
polls now, sources in his ruling PDL party said.
The timetable imposed by an alarmed President Giorgio
Napolitano could see a broad-based government as early as Sunday
night or Monday following Berlusconi's resignation at the
weekend, ending the flamboyant media magnate's 17-years of
Organisers of a conference in the Netherlands at the weekend
said Monti had pulled out at the request of Napolitano and a
political source in Rome said he would meet the president on
Monti, 68, who is highly respected internationally, has been
pushed by markets for weeks as the most suitable figure to lead
a new government. The sources estimated he had a 90 percent
chance of being appointed.
Italy managed to sell 5 billion euros ($6.8 billion) of
one-year bonds on Thursday, but had to pay a whopping 6.087
percent interest rate, the highest in 14 years. Nevertheless the
successful auction and prospects of a rapid solution to the
political stalemate appeared to calm markets.
The spread on interest rates between Italian 10-year bonds
and German bunds eased to 520 basis points, still in dangerous
territory but significantly below Wednesday's record of 576.
Yields dropped below the red line of 7 percent, after reaching
more than 7.6 percent on Wednesday.
Both houses of parliament are expected to pass a financial
stability law incorporating economic reforms demanded by the
European Union and IMF by Saturday or Sunday. This will trigger
Berlusconi's resignation as agreed with Napolitano on Tuesday.
NEW SENSE OF URGENCY
Before the new sense of urgency this process was expected to
take at least a week. Napolitano could then hold formal
consultations with political parties in a few hours instead of
the usual days or weeks and appoint Monti by Sunday or Monday.
The sources said there were still arguments about the
line-up of ministers in the new government but it would likely
be a mix of centrist politicians and technocrats.
Under current plans, the government would implement reforms
to liberalise Italy's economy, stimulate growth and cut its huge
debt before elections early next summer. The inclusion of
elections in the plan is intended to win the support of
politicians who oppose an unelected government.
The new administration is expected to be supported by a
large part of Berlusconi's PDL party, centrists and the biggest
opposition force, the Democratic Party, the sources said.
However, they cautioned that the government was not a done
deal and the situation could change by the hour. Berlusconi's
chief coalition partner, the populist Northern League, said it
would not back Monti.
The party, which is split internally, has also resisted a
key reform on pensions. It may have made a calculation that it
would benefit from a period in opposition to redress a sharp
loss of popularity from its association with Berlusconi.
Angelino Alfano, secretary of Berlusconi's PDL, said the
party preferred elections but would make a final decision after
meeting Napolitano. The sources suggested this was a holding
position while the party overcame internal divisions.
Napolitano appointed Monti a senator for life on Wednesday,
in a move widely seen as a sign he would ask the academic to try
to form a government.
Commentators said this effectively made Monti a bona fide
politician rather than an outsider, with Napolitano sensitive to
accusations that a technocrat government would be undemocratic.
IMF head Christine Lagarde added her voice to calls for an
end to the impasse, saying that lack of political clarity in
Italy was fuelling uncertainty in the markets. British Prime
Minister David Cameron said Rome presented a "clear and present
danger" to the euro zone.
In a highly unusual step, the sober business daily Il Sole
24 Ore carried a huge banner headline on Thursday reading:
"Hurry Up", in a call to Italy's political class to forget their
own interests and save the country.
Business and banking associations have repeatedly called for
a unity government of the kind that has been successful at times
of crisis in Italy in the past.
Monti, a respected economist who is currently head of
Milan's prestigious Bocconi university, is a tough negotiator
with a record of taking on powerful corporate interests as
European Competition Commissioner.