Nov. 14 - As Italy's new head of government, Mario Monti, is forming his cabinet, Rome was able to sell 3 billion euros of five year bonds. But German Chancellor Angela Merkel warns Europe could be going through its toughest hour since World War Two. Joanna Partridge reports.
Former European Commissioner Mario Monti's first day on the job. After a weekend of frenetic activity in Italy, President Giorgio Napolitano appointed Monti as head of a new government on Sunday. Now Monti has to hold talks with the main politicial parties and appoint what's expected to be a relatively small cabinet. His technocrat government will have its work cut out. Rome paid a record price to sell its debt in another bond auction. It cost Italy 6.29% to sell 3 billion euros of five-year bonds - around a percent higher than the interest it had to pay in mid October. But Justin Urquhart Stewart from Seven Investment Management says markets were relieved there was enough demand from investors. SOUNDBITE: Justin Urquhart Stewart, Marketing Director, Seven Investment Management, saying (English): "It's not just a debt issue, it's all about confidence. And what we're seeing at the moment is a wave of short-term confidence but the underlying problems of Italy are merely the symptom of what we're dealing with and not the cause. The cause is that the euro's not working properly and the structure behind that needs to be addressed." Others like New York University Professor Nouriel Roubini - who predicted the collapse of the U.S housing market - believe nothing Italy does will prevent the recession getting worse. SOUNDBITE: Nouriel Roubini, Professor of Economics at the Stern School of Business, New York University, saying (English): "After you patch together a little bit of IMF money and European money and that's not enough, then markets are going to realise you need a big bazooka and Italy may be forced into debt restructuring. Down the line it might even be forced into an exit from the eurozone." But German Chancellor Angela Merkel says Europe is tackling its problems, despite experiencing its tough est hour since World War Two. And she warned Europe could fail if the euro did. SOUNDBITE: German Chancellor Angela Merkel, saying (German): "We need to further develop the European Union's structure. This does not mean less Europe, it means more Europe. It means building Europe in a way for the euro to have a future." Merkel has urged euro zone states to push towards closer fiscal union. But many are saying she needs to come up with new ideas to solve the crisis. Joanna Partridge, Reuters