Market turmoil as Italy\'s Monti prepares new cabinet

Italy\'s Mario Monti was poised to unveil his new government with eurozone financial markets in turmoil on Tuesday, as he tried to build a strong consensus to push through painful economic reforms. The former European commissioner won crucial support from the country\'s two main political groupings -- the centre-left Democratic Party and outgoing premier Silvio Berlusconi\'s centre-right People of Freedom party. The economist, who has said Italians face \"sacrifices\" to fight off an unprecedented debt crisis, was due to meet trade union leaders and representatives of women\'s and youth groups later on Tuesday. Investors piled the pressure on Monti with stocks in Milan losing more than 2.0 percent and Italy\'s borrowing costs breaking through a 7.0-percent threshold that has set off alarm bells around Europe and beyond. \"Monti is afraid. He is concerned that his government may find itself without political sponsors and last only a few months after being bashed around by the guerilla in parliament,\" La Repubblica daily said. Corriere della Sera urged Monti to represent \"a vast public opinion, uniting for the first time people who never voted Berlusconi along with his many supporters who now want someone else to get us out of the ditch\". Monti said Monday that he wanted his cabinet to stay on until 2013 -- the scheduled date for the next elections, defying calls for a shorter time in government from some political leaders who want early elections. The 68-year-old Monti has also asked for investors to be patient after intense international lobbying for him to forge a cabinet and move urgently to tackle Italy\'s worryingly high 1.9-trillion euro ($2.6-trillion) debt. \"I am not ignoring the importance of the markets but we are in a democracy and there is a certain time that is needed,\" he said on Monday. European stock markets and the euro fell against the dollar on Tuesday, as analysts said the new leaders of Italy and Greece had to act fast. \"Whilst the new governments led by reform-minded economists are seen as a good starting point for the reform process, implementation will at best take time,\" said Ric Spooner, chief market analyst at CMC Markets in Sydney. Lee Hardman at The Bank of Tokyo-Mitsubishi UFJ in London, said: \"While any new Italian technocrat government will likely improve the likelihood of more credible fiscal consolidation measures and required economic reforms being implemented, the market will need to be convinced.\" The worst performer on the Milan exchange was aerospace and defence giant Finmeccanica, which plummeted 16 percent after the company unveiled a net loss of 324 million euros for the first nine months of the year. That came a day after Italy\'s biggest bank UniCredit announced it had suffered a 10.64 billion euro loss in the third quarter and would cut 5,200 jobs by 2015 in a sign the country is far from shaking off the crisis. There were scenes of joy in the streets of Rome when Berlusconi resigned following a parliamentary revolt and a wave of market panic, but Italians are sobering up to an uncertain political and economic future. President Giorgio Napolitano has said he wants the government to be in place by the end of the week and has warned of a need for urgency because 200 billion euros of Italian debt becomes due by April next year. Italian analysts said the new Monti government could be sworn in by Napolitano as early as later on Tuesday or by Wednesday. The new government could then receive formal approval from Italy\'s upper and and lower houses of parliament on Thursday and Friday, the reports said. The European Union, which together with the International Monetary Fund is now auditing Italy under a newly-imposed monitoring mechanism, has warned the country may need to pass extra budget austerity measures. Monti\'s nomination has however been applauded by Brussels. \"What I hope now is that in Italy there will be a necessary political consensus,\" European Commission head Jose Manuel Barroso said on Monday. \"If there is real consensus around this new government, I hope that confidence ... of the investors will come back to Italy.\"