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Finmeccanica Chief Is Arrested in Bribery Case

February 12, 2013 by Leave a Comment

PARIS — Italy awoke Tuesday to yet another corporate scandal with political overtones, as prosecutors in Milan arrested the head of the state-controlled aerospace company Finmeccanica in an investigation related to the sale of 12 helicopters to India in 2010.

The Finmeccanica chairman and chief executive, Giuseppe Orsi, was taken in for questioning by prosecutors. Bruno Spagnolini, head of the AgustaWestland helicopter unit of Finmeccanica, was placed under house arrest. The authorities also raided the AgustaWestland corporate offices in Milan.

The investigation is focused on whether company executives violated bribery and corruption laws in seeking the €560 million, or $753 million, helicopter deal with the Indian military.

Prime Minister Mario Monti said Tuesday that the government, which owns a 30 percent stake in Finmeccanica, was prepared to do whatever was necessary to clean up the company, the second-largest industrial group in Italy, after Fiat.

“There is a problem with the governance of Finmeccanica at the moment and we will face up to it,” Mr. Monti said on RAI television.

The Italian economy ministry issue a statement saying that despite the government’s stake in the company, it is not involved in the day-to-day operations of Finmeccanica. But it said the government would cooperate with the prosecutors’ investigation and ensure that a management was put in place to ensure “transparency in its decision making.”

With national elections just two weeks away, the Italian establishment has been unnerved by a series of corporate investigations. In one, Monte dei Paschi di Siena, a bank in Tuscany, has acknowledged using secret derivatives deals to mask hundreds of millions of euros in losses.

In another case, Eni, the country’s biggest oil company, said last week that Milan prosecutors had expanded an investigation of alleged corruption at one of its subsidiaries, Saipem, to include the parent company and its chief executive, Paolo Scaroni.

Some observers say the spate of scandals suggests that prosecutors are taking advantage of a political vacuum before the election to move on cases for partisan ends.

But James Walston, a professor of political science at the American University of Rome, said it was unlikely that the cases had been timed to the coming elections. “Someone might have moved some papers a little faster with that in mind,” he said, but “it won’t make a huge difference” to voters.

The effect of these scandals is more to alienate people and persuade them not to vote, rather than to change their minds, Mr. Walston added.

Finmeccanica said Tuesday that “the operating activities and ongoing projects of the company will continue as usual.” In addition, the company expressed “support for its chairman and C.E.O., with the hope that clarity is established quickly.”

The Indian Defense Ministry said in a statement that in response to media reports linking it with AgustaWestland in Britain, it was seeking information from the Italian and British governments, but had not learned of any evidence to substantiate the allegations. The ministry said it was referring the case to the Central Bureau of Investigation, the Indian agency responsible for investigating corruption cases.

News of the investigation was first reported by the Italian newspaper Corriere della Sera.

Italian press reports said two other people, residents of Switzerland, were being sought by Milan prosecutors on suspicion that they had acted as middlemen.

A spokeswoman for Finmeccanica in London, Clare Roberts, declined to comment beyond the company’s statement. Prosecutors could not immediately be reached for comment.

Consob, the Italian stock market regulator, banned short-selling of Finmeccanica shares on Tuesday and Wednesday after the company’s shares fell more than 10 percent in early trading. The stock closed down 7.3 percent on Tuesday. A short sale is a bet that a company’s stock will fall.

The case puts the company, which is in the middle of a critical restructuring, in a difficult position. A board meeting is expected to be called soon to discuss whether to appoint an interim chief executive.

Article source: http://www.nytimes.com/2013/02/13/business/global/finmeccanica-chief-is-arrested-in-bribery-case.html?partner=rss&emc=rss

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Political Economy: Monte Dei Paschi’s Revelations Put Spotlight on Italian Politicians

January 27, 2013 by Leave a Comment

The Monte dei Paschi di Siena saga is not just an Italian affair. Revelations that complex financial transactions used by the bank, the country’s third-largest, had the effect of hiding losses are causing a political storm in Italy.

With a general election only weeks away, Silvio Berlusconi, the former prime minister, looks as if he will be the main winner from the political spat. Mr. Berlusconi’s camp has attacked Pier Luigi Bersani’s Democratic Party, which is leading in the opinion polls, for being close to Monte dei Paschi, or M.P.S. It has also criticized Mario Monti, the current prime minister, who agreed to increase the M.P.S.’s bailout to €3.9 billion, or $5.25 billion.

The scandal won’t be enough to get Mr. Berlusconi back as prime minister. But it could prevent a Bersani-Monti coalition from running the country with a solid majority in both houses of Parliament. If so, fears about Italian political risk could return to haunt the markets.

The still-murky saga has also put the spotlight on Mario Draghi, the European Central Bank president, because he ran the Bank of Italy when M.P.S. was getting into such a mess. Giulio Tremonti, who was finance minister in Mr. Berlusconi’s last government, tweeted that it was “stupefying” that Mr. Draghi had failed to discover or prevent the complex transactions.

The Italian central bank’s defense is that, while some of its supervisors knew about the transactions, it did not know that they were linked to other money-losing operations because key documents were hidden from it. What’s more, even though it was worried about M.P.S.’s weak risk management, it didn’t have the power to fire bank directors, although Mr. Draghi had asked the last Berlusconi government for such authority. Its moral suasion did, though, eventually help lead to the removal of M.P.S.’s old management last year.

The Sienese bank’s troubles began in November 2007 when it bought Antonveneta, another Italian bank, from Santander of Spain for €9 billion. This was a crazy price. The subprime mortgage crisis had already burst into the open and the price tag was 60 percent more than Santander had itself paid only a few months earlier when it helped carve up ABN Amro, the Dutch banking group that had acquired Antonveneta in 2005. Italian prosecutors are now investigating why M.P.S. paid so much.

Some people think the Bank of Italy should have stopped M.P.S. from buying Antonveneta. The central bank’s defense is that it didn’t have the power to say a deal was overpriced. All it could do was insist that M.P.S. raise more capital, which it did.

Even so, the Antonveneta deal left M.P.S. with a weak balance sheet just as the financial crisis was about to go into overdrive. That’s when two other investments — which have triggered the current turmoil — went bad: one nicknamed Santorini and the other called Alexandria.

The original Santorini deal was done with Deutsche Bank in 2002 to warehouse M.P.S.’s shares in yet another Italian bank, San Paolo di Torino. That transaction allowed M.P.S. not to report losses on the stake provided its value didn’t fall below a certain level. However, in 2008, the value of the stake plummeted, meaning that M.P.S. was staring at a loss of about €360 million. That was unfortunate, given that the bank’s balance sheet was already stretched after the Antonveneta deal.

M.P.S. engaged in two more transactions with Deutsche Bank that had the effect of mitigating its Santorini loss. One was structured so that it was likely to generate a profit for M.P.S.; the other so it was likely to generate a profit for the German bank. M.P.S. rapidly unwound the first transaction, helping it counter the loss on the original Santorini deal. But it hung on to the second investment and didn’t report any immediate loss from that.

Deutsche Bank’s defense for being involved in the transaction is that it asked for and received assurances from M.P.S. senior management that its auditors and regulators had been informed of the transaction’s details.

The Alexandria transaction was somewhat similar. In this case, M.P.S.’s original bet was on risky credit derivatives called C.D.O. squareds that, by 2009, were threatening it with a loss of about €220 million.

That is when M.P.S. embarked on another series of side deals — this time with Nomura. One transaction involved Nomura, a Japanese investment bank, buying the C.D.O. squareds from M.P.S. at above their market price, helping the Italian bank to avoid booking a loss. The other was structured so Nomura would make a profit, but M.P.S. didn’t acknowledge the countervailing loss up front.

Nomura says the deal was approved by M.P.S.’s board and its chairman at the time, Giuseppe Mussari, and was also reviewed by M.P.S.’s auditors, KPMG. M.P.S. denies that its board approved the deal, and KPMG says it never received the Alexandria documentation. Mr. Mussari denies any wrongdoing.

These complex transactions only came to light when an exchange of letters from Nomura to M.P.S. was found in a hidden safe by the Italian bank’s new management last October. It immediately told the Bank of Italy and the judicial authorities. Snippets of what happened have started to seep out into the press in the last two weeks, forcing M.P.S. to acknowledge that it was sitting on megalosses and triggering the political storm.

But the full facts have not come out. Until they do, it will be impossible to know for sure whether the Bank of Italy, Deutsche Bank and Nomura could have been more vigorous in pursuing hints that things weren’t quite right or if they were truly hoodwinked by M.P.S.

Hugo Dixon is editor at large of Reuters News.

Article source: http://www.nytimes.com/2013/01/28/business/global/28iht-dixon28.html?partner=rss&emc=rss

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DealBook: A Chance to Rub Shoulders With the Elite of Business and Politics

January 21, 2013 by Leave a Comment

Mario Draghi, president of the European Central Bank.Michel Euler/Associated PressMario Draghi, president of the European Central Bank, is scheduled to be a keynote speaker at the World Economic Forum in Davos, Switzerland.

The minimum $20,000 entry fee has been paid. Fur hats and silk underwear are in the luggage. And stacks of business cards are ready to be slipped into the palms of the business and political elite gathering this week at the snowy alpine fortress that is the World Economic Forum in Davos, Switzerland.

For the more than 2,500 people making the pilgrimage this year, some personalities will command more attention than others. On the Continent, where fears of the euro’s imminent demise dominated thinking for the last year, Chancellor Angela Merkel of Germany and the president of the European Central Bank, Mario Draghi, are being credited rather than pilloried these days for saving the euro from disaster.

Together with Prime Minister Mario Monti of Italy and the International Monetary Fund’s managing director, Christine Lagarde, they will be among the keynote speakers on whether Europe’s fortunes will at last take a turn for the better.

Prime Minister David Cameron of Britain may throw cold water on that idea, if he attends. But in Davos, if he does turn up, his main task may be to explain why investors should not be spooked by his warning that Britain may drift away from the European Union.

World Economic Forum in Davos
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With plenty of dynamism stirring outside Europe, emerging markets leaders will be making the case for investment dollars to flow their way. Executives and academics from China and India will swarm the halls to discuss the evolution in their economic climate, which has cooled since a year ago but remains well ahead of those in Western economies.

Prime ministers from a number of African countries will also make the trek to explain how dynamism continues to build, especially on the southern part of the continent. Two years after the Arab Spring unfolded, numerous decision-makers from North Africa will outline plans for overhauls and address the political, social and economic transitions, and upheavals, in their countries.

With fighting in Mali still making headlines and the Algerian gas-field hostage disaster still being sorted out, North African issues are very likely to be prime topics.

Not everyone has been panting to get to Davos. Officials from the United States, for example, will barely be represented. But those coming — including Senator John McCain, Republican of Arizona, who is a regular at the forum, and Susan Rice, the United States ambassador to the United Nations and a former candidate to be the next secretary of state — are likely to stir controversy.

And some of the highest-wattage regulars are turning their attention elsewhere. Three notable absentees will be the top Google executives, Sergey Brin, Larry Page and Eric E. Schmidt. (For Mr. Schmidt, Davos evidently doesn’t have the same allure as North Korea, where he visited recently.) Google has not said why its leaders are not attending.

But some other men with big money will be on hand, though Jamie Dimon, the chief of JPMorgan Chase, can’t count on quite as much money as before, now that the bank’s board had decided to dock his pay after a multibillion-dollar trading loss in 2012.

Stephen A. Schwarzman of the Blackstone Group, Brian T. Moynihan of Bank of America and George Soros will all be sniffing out investments. So will Lloyd C. Blankfein, the head of Goldman Sachs, who has shunned Davos in the past but decided to join the party this time.

It’s not all about deals, though. Bill and Melinda Gates, hardy Davos perennials, will again be there to preach the need to invest in what counts for future generations: education, health and related philanthropic activity.

For celebrity sizzle, the South African actress Charlize Theron will be in town to promote her Africa Outreach Project. The forum discouraged celebrities for a while after Sharon Stone stole the show in 2005 and Brad Pitt and Angelina Jolie did the same the following year. Since then, a few stars have swanned in, mostly, it seems, out of curiosity.

Last year, Mick Jagger sidled into a spate of private Davos parties wearing a velvet plum jacket and a lilac shirt, speaking eruditely about current events with people like Jimmy Wales, the founder of Wikipedia, before busting a few lanky dance moves late in the evening.

This year, another power broker expected to prowl the corridors is Derek Jeter of the New York Yankees. Whether anyone will consider face time with him a must probably depends on a given attitude toward American baseball generally, and the widely followed Yankees specifically.

Article source: http://dealbook.nytimes.com/2013/01/21/a-chance-to-rub-shoulders-with-the-elite-of-business-and-politics/?partner=rss&emc=rss

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Italy Grapples With Polluting by Ilva, a Giant Steel Maker

December 10, 2012 by Leave a Comment

After he died this year at the age of 64 from violent, sudden-onset lung cancer, his friends put a plaque on the wall of their apartment building: “Here lived the umpteenth death from lung cancer. Taranto, March 8, 2012.”

Today, Ilva, which is among the largest plants in Europe and produces more than 30 percent of Italy’s raw steel, is at the heart of a clash over the future of Italian industry, one that pits economic concerns against environmental ones and the power of the government against the judiciary amid Italy’s struggle to compete in a global economy.

After a court ordered sections of the plant closed and steel from it impounded last month, arguing that it had violated environmental laws and was raising serious health concerns in the area, the government passed an emergency decree that would allow it to continue operating while cleaning up its act, saving 20,000 jobs nationwide. Magistrates said that the new law, which must be approved by Parliament, violated the Constitution by allowing the executive branch to circumvent the judiciary.

In many ways, the Ilva plant is an emblem of the Italian economy that the technocratic government of Prime Minister Mario Monti inherited last year and has been trying to repair before elections expected early next year. It is the product of decades of physical and political neglect, an aging industrial giant that came of age in the economic boom of the late 20th century and is struggling to keep pace in the 21st.

For Italy, though, the plant is too big to fail. It produces about 8 percent of European steel — and the government estimates that stopping production would cost the Italian economy more than $10 billion a year.

But the environmental concerns are real. Dark plumes of smoke billow from stacks dominating the landscape, while dust from the plant stains the white tombstones in the local cemetery a rusty pink. An ordinance forbids children from playing in unpaved lots. In 2008, a local farmer was forced to slaughter 2,000 sheep after they were deemed contaminated with dioxin.

Some studies have found that cancer rates in Taranto, an ancient harbor in the heel of Italy’s boot, are over 30 percent higher than the national average, and far higher for certain cancers, particularly of the lungs, kidneys and liver, as well as melanomas.

Bruno Ferrante, the president of Ilva, said that the Riva Group, which owns the plant, has been spending from $325 million to $400 million a year to upgrade the plant since it bought it in 1995.

Mr. Ferrante added that cancer rates had been falling recently — government-approved studies bear that out — but acknowledged that there was more to be done. “The pink dust is certainly a problem, and we are aware of it,” he said.

Arguments about the plant’s economic importance fall on deaf ears here. “Health comes first,” Ms. Lumino said, sitting in her apartment with photos of her husband, including one on a chain that hung from her neck. He was one of many Ilva workers sent into early retirement in 1998 after the plant found evidence of asbestos contamination. “If you have money but not your health, what good is it?” she asked.

Ms. Lumino remembered a time before the plant was built. “There were farms, clean air, olive and almond trees,” she said. “We would picnic by the coast every Easter Monday.”

Even with the new decree, the conflict is far from over. The decree orders the Riva Group to invest $3.8 billion to reduce its emissions and bring the plant up to code before 2016, the deadline for other European countries to modernize.

If Riva fails to do so, the new law would give the government more powers to intervene. If Riva is unable to raise enough money to modernize, it could ask for European Union subsidies or sell the plant, which could jeopardize Italy’s European standing.

Brazilian companies are already eying Ilva, according to Italian news media reports. Mr. Ferrante said that Riva had no intention of selling and had a “pretty significant” ability to borrow more money and also draw on European Union cofinancing.

Gaia Pianigiani contributed reporting.

Article source: http://www.nytimes.com/2012/12/10/world/europe/italy-grapples-with-giant-polluting-ilva-steel-plant.html?partner=rss&emc=rss

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Looking Ahead: Economic Reports for the Week of Oct. 29

October 29, 2012 by Leave a Comment

ECONOMIC REPORTS Economic information to be released this week includes personal income and spending for September and the Chicago Federal Reserve Midwest manufacturing index (Monday); the Standard Poor’s/Case-Shiller home price index for August and consumer confidence for October (Tuesday); the Institute for Supply Management manufacturing index for October, construction spending for September, weekly jobless claims, retail sales for October and ADP employment for October (Thursday); and unemployment for October (Friday).

CORPORATE EARNINGS Companies scheduled to release quarterly earnings reports include Burger King Worldwide (Monday); Deutsche Bank, Standard Chartered, UBS, Ford Motor, Chrysler, Pfizer and BP (Tuesday); Barclays and General Motors (Wednesday); Exxon Mobil, American International Group and Starbucks (Thursday); and Royal Bank of Scotland, Chevron, the Washington Post Company and Chesapeake Energy (Friday).

IN THE UNITED STATES On Monday, the insider trading trial of Anthony Chiasson and Todd Newman, formerly of the hedge fund Level Global, begins with jury selection in Federal District Court in Manhattan, and the federal bankruptcy court in Manhattan will take up a deal under which Eastman Kodak would pay its retirees $7.5 million in cash and grant them $650 million in claims.

On Tuesday, American Airlines’ parent, AMR, will ask the bankruptcy court for permission to obtain up to $1.5 billion in new bond financing.

On Thursday, automakers will report their North American sales for October.

OVERSEAS On Monday, Prime Minister Mariano Rajoy of Spain is set to meet the Italian prime minister, Mario Monti, in Madrid for talks on the economic crisis.

On Thursday, Chancellor Angela Merkel of Germany is scheduled to meet Prime Minister Enda Kenny of Ireland for talks.

Article source: http://www.nytimes.com/2012/10/29/business/economy/economic-reports-for-the-week-of-oct-29.html?partner=rss&emc=rss

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News Analysis: Germany Resists Europe’s Pleas to Spend More

January 9, 2012 by Leave a Comment

Could, but almost certainly will not. Even if German lawmakers had not made a balanced budget a constitutional obligation two years ago, there is a deep consensus among policy makers and economists that austerity and growth are not enemies. They are comrades.

Jens Weidmann, president of the Bundesbank, the German central bank, was channeling generations of hawkish predecessors last week when he called on the government of Chancellor Angela Merkel to speed up efforts to cut new borrowing close to zero.

“We must quickly achieve a structurally balanced budget,” Mr. Weidmann said in an interview with the Tagesspiegel newspaper. Germany should set an example for the rest of the beleaguered euro zone, he said.

The Bundesbank president speaks for a large swath of the German public, and his comments suggest that President Nicolas Sarkozy of France and Prime Minister Mario Monti of Italy should not expect more of a financial commitment when they meet with Mrs. Merkel in Berlin this week. Mr. Sarkozy’s visit is Monday and Mr. Monti’s is Wednesday.

“One of the lessons of the crisis,” Mr. Weidmann said, is that cutting budget deficits “should be postponed as little as possible.”

That view annoys many people outside Germany, who see it as another example of the country’s lecturing the rest of Europe while putting a priority on its domestic interests. Germany, with the lowest borrowing costs and strongest economy among the big European countries, should lend the rest of Europe a hand, they say.

“Germany is the only country that has this freedom, and if they don’t use this freedom, that is bad,” said Éric Chaney, chief economist at AXA Group, a French insurer.

With interest rates on German bonds close to zero, Mr. Chaney noted, should the country not be using this cheap money to invest in education and infrastructure and to promote long-term growth while stimulating demand around Europe?

And Germany should do so for its own good, he added. “If Germany has a problem, it is the instability of the euro,” Mr. Chaney said.

Evidence of a coming downturn in the euro zone remains strong, despite some economic indicators in recent weeks that have been better than expected. Retail sales in the euro area fell nearly 1 percent in November from October, according to data released Friday, while unemployment remained at 10.3 percent. The European Commission’s confidence indicator fell in December for a 10th month in a row.

Despite the worsening circumstances — which most economists schooled in the thinking of John Maynard Keynes see as a compelling reason to loosen monetary reins and increase government borrowing — German fiscal policy is already effectively set in stone. In 2009, the country adopted a constitutional “debt brake” that requires a nearly balanced national budget by 2016.

Berlin can achieve that requirement only if it starts reducing deficit spending now. Mr. Weidmann called for the government to achieve that goal sooner.

There are sightings of Keynesians from time to time at German universities and research institutes, but they are a rare breed. Mr. Weidmann represents the prevailing school of thought, as does Jörg Asmussen, a former high-ranking official in the German Finance Ministry who joined the executive board of the European Central Bank last week.

Both studied at the University of Bonn under Axel A. Weber, a hawk’s hawk who was Mr. Weidmann’s predecessor as president of the Bundesbank.

Mr. Weber, in turn, followed in the footsteps of guardians of fiscal and monetary probity like Otmar Issing, a former official at the Bundesbank and E.C.B. who remains a towering figure in German economics. On Friday, the Frankfurter Allgemeine newspaper devoted a full broadsheet page to an essay by Mr. Issing calling for rigid fiscal discipline to restore confidence in the euro.

Article source: http://www.nytimes.com/2012/01/09/business/global/germany-resists-europes-pleas-to-spend-more.html?partner=rss&emc=rss

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Italy Passes $40 Billion Austerity Plan

December 22, 2011 by Leave a Comment

Although it has a parliamentary majority, the month-old technocratic government of Prime Minister Mario Monti called a confidence vote on the measures to avoid having to address scores of modifications proposed by the Northern League, once a pillar of former Prime Minister Silvio Berlusconi’s center-right coalition and now the loudest opposition party.

The measures — which have grown increasingly unpopular as the reality sets in for Italians — reinstate a property tax on first homes, among other tax increases; raise the retirement age to 66 for men and 62 for women by 2012; and raise the ceiling for cash transactions to $1,300, among other measures to crack down on tax evasion.

The government has said that it tried to spread the pain among all segments of society and not just hit what many call “the usual suspects” — taxpaying salaried employees who often take the brunt of tax increases because tax evasion among non-salaried workers is so high.

Mr. Monti — a former European commissioner and university president who must work with a Parliament whose largest bloc, the center-right, is eager for early elections to solidify its political standing — has said that the bywords of his government are “equity,” “rigor” and “growth.”

To stimulate growth — which remained flat at 0.3 percent in Italy over the past decade — the measures also provide tax incentives for businesses that hire women and people under 35 on permanent contracts. Business groups have called for even more sweeteners to prevent the economy from contracting further.

In a speech just before the vote, Mr. Monti underlined the need to orient European economic policies more toward growth, rather than just concentrating on fiscal discipline. Calling the measures a “proof of collective discipline,” Mr. Monti said that the package enabled Italy to hold its head high as it faces the undeniably serious European crisis.

Although Mr. Monti still enjoys broad political and popular support, the measures have become increasingly unpopular in a growing climate of economic uncertainty, in a country that is already in recession, and where salaries have remained flat in recent years while the cost of living has risen.

“I know that we all have to cooperate and that the measures were needed, but my feeling is that they always turn to the same people, like pensioners or those with low salaries,” said Maurizio Capecci, an unemployed 57-year-old who sells lottery tickets during the Christmas season in downtown Rome. “I think the government should have introduced a wealth tax. Why can’t those who have more give more, but for real?”

A strike called by labor unions shut down national transportation last week and more strikes are anticipated in the coming months to protest changes in pension rules and labor contracts.

Mr. Monti’s government has said that it is planning to tackle labor reform — long a third rail in Italian politics — in the new year.

Gaia Pianigiani contributed reporting.

Article source: http://www.nytimes.com/2011/12/23/world/europe/italy-passes-40-billion-austerity-plan.html?partner=rss&emc=rss

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Mario Monti Accepts Job as Italy’s Premier

November 14, 2011 by Leave a Comment

Mr. Monti, 68, a respected economist who has promised to be a steady hand in a time of market turbulence, said he expected to move ahead as soon as he secured a parliamentary majority for the new government.

Assembling a majority usually requires days or weeks of talks, but Italy does not have the luxury of time. Skeptical investors have pushed the country’s borrowing costs to dangerous heights, putting at risk the euro currency that 17 nations share. The crisis forced the resignation of Prime Minister Silvio Berlusconi on Saturday, turning Italy’s most complex political shift in nearly two decades into one of its most urgent transitions.

President Giorgio Napolitano, who as the head of state must approve the formation of a new government, gave a tough speech on Sunday aimed at reassuring investors about Italy’s commitment to the euro and warning the nation’s insular political class about the stakes involved. He called on lawmakers to form a broad coalition in support of Mr. Monti that would be able to push through urgent economic measures.

News media reports said that Mr. Monti initially sought to include figures from the major parties in his cabinet in an effort to share the political cost of the government’s program, including unpopular austerity measures. But while most major parties were prepared to back his government, few were willing to join it. The new cabinet is now expected to consist mainly of technical experts rather than politicians.

Mr. Napolitano, who met with leaders from across the political spectrum on Sunday to gather pledges of support, said in his speech that “it is a responsibility we perceive from the entire international community to protect the stability of the single currency as well as the European frame work.” He added that Italy understood how its actions would affect “the prospects for the recovery of the world economy.”

Italy must repay or refinance almost 200 billion euros, about $276 billion, worth of maturing bonds by April 2012. Last week, the political turmoil drove the effective yields on Italy’s bonds to 7.4 percent, a level at which other countries in the euro zone have sought bailouts. If Italy is forced to continue to pay such high rates to borrow, it will have difficulty in handling its debt load, which is among the highest in Europe.

The president’s remarks were widely seen as directed mainly at Mr. Berlusconi’s political party, the People of Liberty, which said earlier on Sunday that it would accept a Monti government, but only for a limited time before going to early elections.

Angelino Alfano, the secretary of the People of Liberty and Mr. Berlusconi’s political heir apparent, acknowledged on national television on Sunday that there was opposition to a Monti government within his party. But he confirmed that the party would back Mr. Monti if certain conditions were met concerning the composition of the cabinet and the how long the government would last before elections.

Mr. Monti declined to say how long he hoped to govern. News media reports suggested that he was aiming to remain in office until the end of the current legislature’s term in 2013. Mr. Monti said he would act “with a sense of urgency, but also with care” in forming a new government; he is expected to present his cabinet and program to Parliament in a few days.

As for his broad goals, he said his government would try to restore the country to financial health and growth without compromising “social equity.”

“We owe it to our children to give them a dignified and hopeful future,” he said.

Not one to be upstaged, Mr. Berlusconi spoke publicly on Sunday evening for the first time since his resignation, vowing in a video that was broadcast on television to redouble his efforts in Parliament to save the country and the euro.

Pale and visibly tired, Mr. Berlusconi called his resignation “an act of generosity” that was carried out with a “sense of responsibility” for Italy, and he said he had been insulted by his jeering critics.

He quoted wistfully from a speech he delivered when he first ran for office in 1994, praising Italy and its promise of freedom. “Mine was and remains a declaration of love for Italy,” Mr. Berlusconi said. “That love remains unchanged.”

In his video address, Mr. Berlusconi called on the European Central Bank to expand its role in shoring up the euro, arguing that the debt crisis extended far beyond Italy.

For their part, European leaders had come to see Mr. Berlusconi as a liability both to Italy and to the single currency after his government repeatedly fell short on promises of fiscal and economic reform. Mr. Berlusconi resigned after Parliament finally approved a package of austerity and growth measures but denied him the majority support he needed to remain in office.

The Berlusconi government had been shadowed in recent years by sex scandals surrounding the prime minister. Mr. Monti attended Mass with his wife on Sunday morning in the Roman Catholic Church of Sant’Ivo in the historic center of Rome.

Many Italians awoke on Sunday to what they felt was a new day in Italian politics, even if many did not quite believe that Mr. Berlusconi, a fixture of public life here for nearly two decades, was really gone. Some young Italians, who increasingly feel shut out by a labor market that protects older workers, considered his departure to be good sign.

“We’ve been following what happened since the summer with growing concern,” said Laura Calderoni, 36, an architect in Rome. “The government’s complete immobility, deafness and incapability to understand reality and act accordingly was very scary.”

She added: “We are part of the brain-drain generation, but I kept on telling all my friends, ‘Don’t flee; it will be over.’ A fairer country starts with citizens like us that build their lives here and believe in it.”

Others said that Italy’s problems did not begin with Mr. Berlusconi and would not end with Mr. Monti.

“I just think that Berlusconi is not the root of all our economic evil,” said Anna Costeri, 43, a dental hygienist from Sardinia who was visiting Rome and said she had voted for a right-wing party in the past. Referring to Mr. Monti’s background, she said, “I am not that hopeful that someone so close to rating agencies and the banks can do our best interest.”

Gaia Pianigiani contributed reporting.

Article source: http://www.nytimes.com/2011/11/14/world/europe/mario-monti-asked-to-form-a-new-government-in-italy.html?partner=rss&emc=rss

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