New PM Monti says Italy faces emergency (Reuters)

ROME (Reuters) ? Italy is facing a serious emergency, new Prime Minister Mario Monti said on Thursday, as he promised rigor and fairness in painful reforms to dig the country out of a financial crisis that threatens the entire euro zone.

Making his maiden speech before an evening confidence vote, Monti said the survival of the euro partly depended on Italy embarking on radical reforms in the next few weeks. The European Union is facing its most difficult challenge, he added.

"The government recognizes that it was formed to resolve a serious emergency in a constructive and united spirit. I would like to use the following expression: a government with a national commitment," he said.

"Only if we can avoid being seen as the weak link of Europe can we contribute to European reforms," said Monti, who was sworn in on Wednesday at head of a technocrat government after a rushed transition from discredited ex-premier Silvio Berlusconi.

Monti, who is rushing to end a collapse in market confidence that has pushed Rome's borrowing costs to critical levels, said he would consider more reforms after implementing pledges made to the EU but never passed by Berlusconi.

But he denied that the measures were imposed by Brussels.

The speech confirmed expectations that the respected former European Commissioner would waste no time in pushing through deep reforms of Italy's stagnant economy.

Monti said measures to vanquish a crisis that has put the euro zone's third economy at the center of its expanding debt crunch would focus equally on cutting Italy's huge public debt and boosting chronically poor growth.

He said the new government would target widespread tax evasion, sub-standard education and training and Italy's creaking welfare system as well as liberalizing the labor market in what are expected to be unpopular austerity measures.

In a 45-minute address, he said the key goals of his technocrat government would be to improve public services and help women and young people to get jobs.

Making clear what he would target, Monti said Italy had a higher average retirement age than in France and Germany and that chronic tax evasion must be fought.

He would also set out a schedule for the sale of public assets, while lower taxes on labor and output would be balanced by higher levies on consumption.

Italy's notoriously closed professions would be opened up in a major campaign to modernize the economy, he said.

In another shot at a notorious problem, Monti said the use of cash should be reduced to cut an underground economy that accounts for nearly 20 percent of GDP.

He further promised to reduce the cost of Italy's political system and cosseted politicians, which has caused increasing public outrage under Berlusconi's outgoing government.

SECOND VOTE

Monti will see a second confidence vote in the lower house on Friday.

He was comforted in his daunting task on Thursday by an opinion poll that said an overwhelming majority of Italians supported him.

The poll taken by the respected Piepoli Institute for La Stampa newspaper said 73 percent of those asked believed his government would be capable of leading an extraordinary effort to fix Italy's problems. Even 60 percent of voters from the center-right, the grouping that backed the last government, said they had faith in Monti.

But there were early signals of the problems facing the new prime minister, who has taken the economy portfolio himself.

Berlusconi, after a few days of silence following his ignominious exit on Saturday, told deputies from his PDL party that the new unelected government was imposed on the country by President Giorgio Napolitano. He said it would last only as long as the PDL wanted, Italian news agencies reported.

Monti will need strong parliamentary support for radical reforms that have been promised by most of the parties, but could evaporate as the measures become more unpopular.

There was also opposition on the streets where thousands of people protested in several cities against what they called a "bankers' government." Protesters clashed with police in the business capital of Milan and in Turin.

With the euro zone debt crisis spreading wider by the day, Monti's policies are unlikely to be enough on their own to rebuild shattered market confidence.

But they will be vital to restoring credibility with international partners who had long lost patience with the repeatedly unfulfilled promises of Monti's flamboyant predecessor Berlusconi.

Italy's welfare system allows many to claim a pension before the standard retirement age of 65 and current labor market rules protect some workers but discourage job creation.

The uphill task Monti faces was underlined by the continued surge in Italian bond yields.

Yields on 10-year bonds were over 7 percent, near the levels that forced Greece and Ireland to seek an international bailout, but which would overwhelm the euro zone's current financial defenses if similar help was needed by Italy's much larger economy.

The appointment of Monti, a sober and reserved economist and tough negotiator with a decade of experience as European Commissioner, was greeted with palpable relief by foreign leaders exasperated by the scandal-plagued Berlusconi.

The growing threat that Italy's economy will slip into recession next year will make it increasingly difficult to keep control of its huge public debt, which amounts to 120 percent of gross domestic product.

(Additional reporting by Steve Scherer; Writing by Barry Moody; Editing by Mark Heinrich)

Source: http://us.rd.yahoo.com/dailynews/rss/europe/*http%3A//news.yahoo.com/s/nm/20111117/wl_nm/us_italy

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