Eurozone debt crisis live: Italy and Greece gripped by political confusion - The Best from Greece

Posted on: 10/Nov/2011

Talks over the creation of a Greek unity government will continue today, as Italy battles to persuade the financial markets it can impose tough economic reformsWhat's going on in Greece today? Hopefully, the creation of a coalition government. But after yesterday's chaotic on/off quest to appoint a someone new prime minister to head an interim government that will take the debt-stricken country to early elections -- shenanigans that have left most Greeks speechless -- it is far from sure that the political instability will be resolved today

Helena Smith reports that:

Athens' feuding party leaders were due to start talks at 10 AM local time (8am GMT) under the auspices of the president of the republic Karolos Papoulias.

Greek media are reporting that after the outrage sparked by his suggestion that long-time ally Philippos Petsalnikos succeed him as prime minister, George Papandreou has once again approached Lucas Papademos, the esteemed economist and former vice president at the European Central Bank who was front-runner for the job until the House speaker suddenly became "favoured" candidate late Wednesday.

"He is our best hope. We are praying he will accept," said a senior official in Papandreou's Pasok socialist party who asked for anonymity for fear of being associated with the drama-filled back-stabbing that has plagued three days of tortuous negotiations so far.

After all the chaos in recent days Papademos, it is widely accepted, would help restore Greece's damaged credibility abroad. But the academic is insisting that he will only take the job on his terms. This morning it was reported that in addition to this demand that the coalition government has a longer life-span than three months.

Papademos was also demanding that Papandreou and the conservative main opposition leader, Antonis Samaras, also give written assurances that they will adopt unpopular austerity measures in return for the rescue funds Greece depends on from the EU and IMF. Samaras, so far, has virulently opposed to do so.

8.07am: As feared, European stock markets have suffered heavy losses at the start of trading.

The FTSE 100 index in London open 99 points lower at 5363, a 1.8% drop. This followed a nasty selloff in Asia, with Japan's Nikkei closing down 2.9%, Hong Kong's Hang Seng losing nearly 5% and Singapore's Straits Times shedding 3.1%.

Terry Pratt, institutional trader at IG Markets, warned early this morning that:

With Italy hurtling towards the brink as bond yields spiral, in turn mitigating any potential benefits of austerity measures, global equity markets are taking fright and traders are embarking on another flight to safety as they keep pulling money off the table.

7.59am: Speculation is rife in Italy this morning that president Giorgio Napolitano is on the brink of appointing a technical government led by economist and former EU commissioner Mario Monti.

Tom Kington has the full story, from Rome:

Despite Silvio Berlusconi's insistence that his resignation after the passing of tough new economic reforms would be followed by snap elections, the continuing rise of yields on Italian government bonds on Wednesday may have left Napolitano with no option but to bring in Monti to implement the reforms as soon as possible.

Angelino Alfano, the man Berlusconi has said could succeed him as party candidate in an election, seemed to suggest the Monti option was closer when he pointed out "Berlusconi was the prime minister who appointed Monti to the EU and countersigned his appointment as a senator for life."

That appointment, made late last night, will help smooth Monti's naming as head of a technical government.

Tom continues:

The formation of a technical government will be opposed by members of Berlusconi's Freedom People party – which is split on the issue -- and the Northern League, making it tougher for Napolitano to find a consensus. "Being in opposition is great, it is more entertaining," League leader Umberto Bossi said on Wednesday, suggesting the League will not support a Monti government.

Lower house speaker Gianfranco Fini said on Wednesday that the reforms Berlusconi has been promising the EU, European Central Bank and IMF will be passed by parliament as early as Sunday. That would put the measures in place before markets open on Monday.

Alfano, said on Wednesday night that Berlusconi would resign "between Saturday and Monday".

Berlusconi has been tardy in one respect. The reforms he has been toiling over for weeks only arrived in the Senate for deliberation on Wednesday. After being approved there they will be voted on in the lower house.

Italian daily Corriere della Sera has published a PDF of the reforms here.

7.45am: Good morning, and welcome to our ongoing live coverage of the European debt crisis.

After yesterday's drama, we're looking at another day of wild swings on the financial markets and political intrigue and excitement across Europe.

Greece's leaders are gathering for another day of negotiations over the creation of a coalition government. With talks scheduled to start shortly, we might finally get a deal. Although on recent form, don't put your last euro on it.

Italy, too, is gripped by confusion at the heart of government. The shocking rise in its borrowing costs yesterday (when the interest rate on 10-year bond yields hit 7.5%), has intensified the pressure. There could be progress on an interim government to replace Silvio Berlusconi.

We'll also be watching Germany and France closely, following reports last night that the two countries are preparing for a two-speed eurozone, or even considering breaking the currency union up.

The early word in the City is that shares are likely to fall sharply again, adding to yesterday's 106-point drop on the FTSE 100.

Tuesday's theme was A Tale of Two Cities, while Wednesday became Great Expectations. I'm tempted to make today Waiting for Godot – a nod to the long wait for a new Greek prime minister …

source: http://www.guardian.co.uk

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