Italy in spotlight as Greece names new PM

Market pressure on Italy eased somewhat Thursday after the president vowed to accelerate reforms to make way for Premier Silvio Berlusconi's resignation as early as this weekend and a bond sale went better than expected.

President Giorgio Napolitano assured skittish investors that Berlusconi will step down, as promised, 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.

In Athens, senior banker Lucas Papademos was named Thursday as the prime minister of the new Greek interim government, charged with keeping the debt-strapped country out of bankruptcy and firmly in the 17-nation Eurozone.

After four days of intense political negotiations, the 64-year-old former vice president of the European Central Bank was chosen to lead a coalition backed by both the governing Socialists and opposition conservatives that will operate until early elections in February.

He replaces outgoing Socialist Prime Minister George Papandreou midway through his four-year term.

€130B debt deal

A statement from the president's office said Papademos would form an interim government that will secure and implement the decisions of a €130-billion (US$177 billion) European debt deal agreed upon during a summit in Brussels on October 27.

The new cabinet will be sworn in today, Friday.

Back in Rome, in what may bode well for a smooth transition, Berlusconi congratulated Monti on his new post in a telegram, wishing him "fruitful work in the country's interest" and recognising his accomplishments.

Italy is under intense pressure to prove it has the political strength to enact measures to increase confidence in its ability to repay its debts, which stand at a huge 120 per cent of economic output.

The country's situation became critical on Wednesday, when the 10-year bond yield jumped above the perilous 7.0 per cent mark on worries that Berlusconi would not leave easily, despite a promise to resign after reforms were passed.

Greece, Portugal and Ireland eventually had to seek bailouts after their borrowing rates rose above 7.0 per cent.

Italy's yield eased back Thursday to 6.88 per cent by early afternoon, after a bond sale went better than expected.

The government easily sold €5 billion (US$6.8 billion) in 12-month bonds at an interest rate of 6.087 per cent. That's up sharply from 3.57 per cent in the last such auction last month, but well below analyst expectations of 7.0 per cent. Demand for the bonds was also strong, almost twice the amount on sale.

Italy, which has total debt of €1.9 trillion (US$2.6 trillion), has to tap financial markets for over €300 billion ($412 billion) in 2012 alone.

With the global stakes high, foreign government leaders were eager to see some progress that could restore confidence to markets.

British Prime Minister David Cameron said Italy posed "a clear and present danger to the Eurozone."

"If the leaders of the Eurozone want to save their currency then they - together with the institutions of the Eurozone - must act now," Cameron said at an investment conference in London. "The longer the delay, the greater the danger."