Italy and Greece Act With More Force on the Debt Crisis

The Italian Senate approved a package of austerity measures, a first step toward easing Prime Minister Silvio Berlusconi from office, while in Athens, the leaders of a new three-party coalition completed details of a national unity government. To speed the process in the Italian Senate, opposition lawmakers refrained from voting, allowing the legislation to pass by a margin of 156 to 12.
The uncommon burst of activity will enable Italy’s lower house to complete parliamentary approval of the package on Saturday. Mr. Berlusconi promised this week to resign once the measures were approved, permitting a new leader to be appointed as the head of a technocratic government. He is expected to step down Saturday or Sunday.
Mario Monti, a former European commissioner, has been widely mentioned as the front-runner to replace Mr. Berlusconi, and he could take over as early as Monday.
In Greece, after similar maneuvers to replace elected leaders with respected, veteran officials known for their expertise rather than their political skills, Lucas Papademos, the prime minister chosen by the three-party coalition, unveiled his cabinet choices, who were sworn in by midafternoon. Finance Minister Evangelos Venizelos — the public face of the country’s austerity effort — will remain in his post, as will other important ministers of the departing government of George A. Papandreou, the former prime minister. Mr. Papademos also brought in several members of opposition parties.
Days of political turmoil roiled bond markets this week, pushing the cost of borrowing in Italy to levels that economists regard as unsustainable and adding to the pressures on politicians. The yield on Italy’s 10-year bond, a barometer of investor anxiety, eased back to about 6.6 percent on Friday after having exceeded 7 percent at the height of the crisis.
By other measures, the promised changes in Greece and Italy heartened investors as well, at least for the moment: the leading stock market indexes in Britain, France and Germany all gained on Friday, and the rally extended to Wall Street, where the Dow Jones average ended the day 259.89 points, or 2.19 percent, higher, and broader market indicators also surged. In foreign exchange trading, the value of the euro rose to nearly $1.37 from $1.35 the day before.
Despite the financial markets’ reactions on Friday, deep-seated worry persists about Europe’s efforts to prevent the debt crisis from plunging the entire global economy into a tailspin. In a sign of American impatience, President Obama called Chancellor Angela Merkel of Germany and Presidents Nicolas Sarkozy of France and Giorgio Napolitano of Italy late Thursday.
Timothy F. Geithner, the American Treasury secretary, also had the euro on his mind. “The crisis in Europe remains the central challenge to global growth,” he said at a meeting of the Asia-Pacific Economic Cooperation forum in Hawaii. “It is crucial that Europe move quickly to put in place a strong plan to restore financial stability.”
Mr. Geithner also urged Asian and Pacific economies to take up the slack as Europe confronts slowing economic growth. “We are all directly affected by the crisis in Europe,” he said, “but the economies gathered here are in a better position than most to take steps to strengthen growth in the face of these pressures from Europe.” 
In Rome, to prolonged applause from other lawmakers, Mr. Monti took a seat in the upper house of Parliament for the first time on Friday after he was appointed a senator for life. Mr. Monti has already held talks with President Napolitano and the speaker of the Senate, strengthening speculation that he is the leading candidate to succeed Mr. Berlusconi.
The legislation approved by the Senate is aimed at reducing Italy’s $2.6 trillion public debt and lifting growth, but the European Union has already said that Italy will need to take further measures.
The legislation includes selling $21 billion of state assets and increasing the retirement age to 67 from 65 by 2026. It also sets the stage for a liberalization of closed professions and labor laws, a gradual reduction in government ownership of local services and tax breaks for companies that hire young workers.
The Berlusconi era may end this weekend, but its legacy will linger for years to come. “Unfortunately, the end of Berlusconi won’t bring the end of the worst political class in Europe,” the columnist Antonio Padellaro wrote on Thursday in the left-leaning newspaper Il Fatto Quotidiano. “But it risks giving rise to a season of zombies, old Christian Democrats resuscitated to divvy up the ruins of our poor country in the name of national unity.”NYT