Technocrat leaders in Italy and Greece rushed to form governments as they sought to limit the damage from the euro-zone debt crisis on Monday, and the euro climbed on relief that a key Italian bond auction drew decent demand from investors.
The president of Italy asked former European Commissioner Mario Monti on Sunday to form a government to restore market confidence in an economy whose debt burden is too big for the euro bloc to bail out.
The Italian Treasury paid a record 6.29% yield to sell five-year government bonds in the first auction held after Monti was asked to head an emergency government.
Italy, which last week saw bond yields rise sharply past the 7% level that has triggered international bailouts of Ireland and Portugal, raised the maximum targeted amount of three billion euros ($4 billion U.S.) at the sale.
Financial markets greeted the appointments of Monti and Greece's new prime minister, Lucas Papademos with cautious optimism in the hope that they would take decisive action.
European shares recovered slightly in choppy trade on Monday morning.
The European Central Bank began buying Italian government bonds as yields rose in the wake of the bond auction.
The appointments of Monti and Greece's new prime minister, Lucas Papademos, were cheered by the money men and European shares recovered slightly in choppy trade but caution was ingrained and hard to erase.
Berlusconi made a parting call on Sunday for the European Central Bank to become a lender of last resort to prop up the euro.
ECB policymakers have made plain they want to keep the onus on governments to bring their debts under control and have rebuffed world leaders who want the bank to ramp up its intervention on bond markets to defend Italy and other vulnerable debtors.
While Italy's problems and the long-drawn-out departure of Berlusconi have pushed the collapse of the much smaller Greek economy backstage, IMF and European leaders will keep Papademos under pressure to implement radical reforms.
Papademos succeeds George Papandreou, whose proposal to hold a referendum on the country's bailout terms prompted EU leaders to raise the threat of a Greek exit from the currency bloc.
The new Greek leader, a former central banker who oversaw his country's entry to the euro-zone in 2002, must win a Wednesday confidence vote in his cabinet before meeting euro-zone finance ministers in Brussels on Thursday, state television reported, where he will be expected to outline next year's draft budget before putting it to parliament.
