ESM Chief warns of developing political crisis in Italy

Markets are reacting with concern to recent developments in Italy, thus emphasizing the importance of the country\'s reform process continuing, Klaus Regling, head of Europe\'s two bailout funds, said in statements to the press, published here on Monday. \"Italy has pushed through important reforms in the past year. Markets have honored this so far; however they have reacted with concern to the recent developments at the end of the last week,\" said Regling, who heads the European Financial Stability Facility (EFSF) and its permanent replacement, the European Stability Mechanism (ESM). He cited the planned resignation of Prime Minister Mario Monti and the renewed candidacy of former prime minister Silvio Berlusconi as the key worries. Regling said it was important for the entire Eurozone that the reform process in Italy be continued. At the same time, he cited the overall market calm as a sign that the mood has shifted away from the fear of a euro breakup that prevailed only a few months ago. Regling also denied that the EFSF rescue fund could further cut interest rates on its loans to Greece without funds from the Eurozone. The EFSF is already financing its own loans at the same rate it charges Greece, he said. \"If interest rates were lowered further, member states would have to make up the difference with their budgets,\" Regling told the press. Meanwhile, Italian Prime Minister, Mario Monti announced after his meeting with Italian President, that he would step down after Parliament passes a budget bill this month. Former Prime Minister Silvio Berlusconi just could not resist. His statement on Saturday that he would seek office again out of a sense of \"responsibility\" for Italy effectively ended the mandate of Prime Minister Mario Monti.