Italian election means new stress for eurozone

AP News
Posted: Dec 10, 2012 10:38 AM

FRANKFURT, Germany (AP) — The surprise announcement that Italy's Prime Minister Mario Monti is to resign is putting new stress on Europe's efforts to get control of its debt crisis.

Markets in the 17 European Union countries that use the euro had been calmer for three months — since the European Central Bank said it was willing to intervene in government bond markets and drive down borrowing costs for indebted countries.

Now investors wonder whether Italy, the third largest eurozone economy, will give up on reforming its economy and reducing its debt load. That is on top of fears Greece will continue to struggle, and suspense over whether Spain will ask for bailout money.

Analysts on Monday were not predicting a meltdown just yet — but it all hinges on Italy's new government.