The financial crisis that brought down the leaders of both Greece and Italy is not finished with the nations yet. The two Mediterranean states must now focus on who will lead their new governments through the turmoil of their debt crises.
Greece at least has already met its first roadblock as its initial choice was rejected with both prominent political parties objecting to him.
In Italy, while Prime Minister Silvio Berlusconi finally agreed to step down after losing a confidence vote, leaders wonder whether a change in government will be enough to stem the rising tide of interest rates on the country’s debt. Yields on 10-year bonds in the Italian government reached a record high of 7.4% on Wednesday morning.
Reuters reported Wednesday that former vice president of the European Central Bank, Lucas Papademos, had been considered the front-runner to replace outgoing Prime Minister George Papandreou, but both Papandreou’s PASOK party and the opposition New Democracy party objected. In addition, Papademos ran into objections from Finance Minister Evangelos Venizelos, over concerns that Papademos would reconfigure the government’s economic team.
Now three others are being discussed, although two have denied it; parliamentary speaker Filippos Petsalnikos and socialist lawmaker Apostolos Kaklamanis have said they were not selected, although Greek media have mentioned them as possible candidates. The third man, Vassilios Skouris, was mentioned by the ruling socialist party; Skouris is the president of the European Court of Justice.
In Italy, reported Bloomberg, the fear is that a change in leadership will not do enough to reassure world markets that the country is serious about its own financial reforms. Simon Smith, chief economist at foreign-exchange broker FXPro Group Ltd., was quoted in the report saying, “Whoever is in charge, the numbers remain the same and this morning they are even worse. This Roman road is currently leading to a cliff. Events have moved far faster than the labored political process of the EU can deal with.”
He is not the only economist to voice concern over the situation. Fredrik Erixon, head of the European Center for International Political Economy in Brussels, was quoted saying, “Italy is now in a dance of death. What we need is a strong reaction from other euro zone leaders to calm markets. But we don’t have it.”