Crisis-hit Italy's new cabinet set to take power

Economist Mario Monti replaces Silvio Berlusconi as Italy's new prime minister on Wednesday, tasked with saving the eurozone heavyweight from a crisis that has set off alarm bells around the world. The 68-year-old ex-European Union commissioner was set to formally accept the nomination from President Giorgio Napolitano around 1000 GMT and then be sworn in with a new cabinet that faces urgent challenges ahead. There will then be a handover of power ceremony with the departing Silvio Berlusconi, the flamboyant billionaire who resigned Saturday to celebrations on the streets of Rome after ruling Italy for 10 of the past 17 years. In intensive political discussions this week, Monti has sought to build consensus around the idea that Italians will have to make "sacrifices" to stave off bankruptcy and restore the country's credibility in Europe. US Treasury Secretary Timothy Geithner said Tuesday that European countries were making incremental progress in addressing the debt crisis, but added: "We hope they will make progress more quickly" at a time that Greece too is racing to avert bankruptcy. US authorities worry that a spillover from the European crisis would hurt the still-recovering American economy. Monti, a widely-respected economics professor, has already met and won endorsements from the leaders of all the main political parties, trade unions and businesses as well as representatives of women's and youth associations. Monti has stressed he wants his cabinet to stay in power until 2013, the scheduled date for Italy's next election and he has called for an end to an "extremely tense" political mood. While he worked in Brussels for 10 years -- during which he faced down US giants Microsoft and General Electric -- Monti has never held political office in Italy and there is some concern about his ability to negotiate a tricky course. Announcing his resignation last week, Berlusconi said he wanted early elections. He has since given his support to Monti but has vowed to make a political comeback and remains an influential figure on the political scene. The reserved technocrat Monti, a starkly different figure to his famously larger-than-life predecessor, has given little detail on what exactly he intends to do but has spoken of the need for "a true civil society." On Tuesday, Monti said Italy needed "economic, social and civil growth that is stable and long-lasting" and he has called for "social equity" as he prepares the country for painful reforms in line with demands from Brussels. He has said he is "absolutely convinced" Italy can overcome its debt crisis but will have to move quickly to reassure the international community. The European Union already gave its firm approval to Monti even before his formal confirmation, but has warned that Italy may need to impose extra budget cuts on top of two austerity plans approved earlier this year. The EU and the International Monetary Fund this month imposed a humiliating auditing mechanism on the country, the eurozone's third largest economy and an EU founding member, to ensure it is fulfilling its reform promises. Italy's high public debt of 1.9 trillion euros ($2.6 billion) is relatively stable and its deficit relatively low, but the country's anaemic growth rate and recent political weakness have pushed up borrowing costs. The rate on Italian 10-year bonds on Tuesday smashed through a 7.0-percent threshold that analysts warn could trigger cash-flow problems within months. Stocks were also under pressure this week, particularly after aerospace and defence giant Finmeccanica and Italy's biggest bank, UniCredit, revealed heavy losses. Italian stocks closed 1.08 percent lower on Tuesday.