Monti, 68, got the backing of both the country's main parties during talks on Tuesday [AFP]

Mario Monti, Italy's prime minister designate, will announce a new government on Wednesday as he tackles a crisis that has brought the country to the brink of economic disaster and endangered the entire eurozone.

A statement from the presidential palace on Tuesday said that Monti, who was appointed on Sunday, would meet Giorgio Napolitano, the president, the following morning to confirm he can form a government.

Monti, 68, got the backing of both the country's main parties during talks on Tuesday and is expected to announce a cabinet composed mainly of technocrats.

Underlining the pressure for Monti to act quickly, yields on Italy's 10-year-bond rate climbed once again to more than seven per cent on Tuesday, the level at which Greece and Ireland were forced into bailouts.

Monti has completed the process of forming a government in less than three days, much less than normal, as Italy races to ward off a major financial and political crisis that has pushed its borrowing costs to untenable levels.

He began consultations on Monday with political parties, trade unions and business groups as well as youth and womens' organisations.

The new administration of the former European commissioner must push through a tough austerity programme demanded by European leaders to restore shattered confidence in Italy.
 
Emma Marcegaglia, head of employers association Confindustria, told reporters after meeting Monti: "We said we will support his government very much.

"We think this government is the last chance for Italy to exit from this situation of emergency."

Monti's chances were considerably boosted earlier by backing from the centre-right People of Freedom Party (PDL) of Silvio Berlusconi, who was forced to step down on Saturday as a result of the crisis.

Angelino Alfano, secretary of the PDL, told reporters: "We think that the efforts of Professor Monti are destined to have a good outcome."

Parliamentary backing

Monti's new government must have strong parliamentary backing to implement what are likely to be unpopular austerity reforms.

Any failure or delay in his efforts would cause a devastating new assault from financial markets.

After a brief respite at the end of last week, when it became clear Berlusconi would resign, Italy's borrowing costs have now returned to critical levels amid uncertainty over whether Monti would succeed.

Rescuing Italy, which has $2.6 trillion of debt, would be too much for the eurozone's existing financial defences.

Monti said his government should last until the next scheduled elections in 2013, despite widespread predictions that politicians intend to give him only enough time to implement reforms before precipitating early polls.

Monti has said he would like to include politicians in his cabinet, but the big parties are insisting it should be made up purely of technocrats, a sign of their wariness about a process forced by financial pressure.

Political sources said mutual suspicions and disagreements among the parties were complicating the attempt to include political figures.

Hermann Van Rompuy, the European Council president, said the eurozone was watching events in Italy "very closely".

Highlighting the precariousness of Monti's situtation, Berlusconi, forced out to the mocking jeers of thousands of protesters on Saturday, is reported to have told supporters the PDL "can pull the plug whenever we want".