Eurozone back from brink with Berlusconi departure

Mr Berlusconi stepped down as prime minister once the package was rushed through to make way for a technocratic interim administration as Rome seeks to ease away from the economic brink and calm volatile markets.

Although MPs had risen to applaud Mr Berlusconi as he left the chamber of deputies following the vote, his route to the presidential palace to tender his resignation late on Saturday was lined by hecklers rejoicing at his departure.

Last night Italy’s new premier-designate, economist Mario Monti, vowed to get to work quickly to try to form a new government.

He said Italy must “heal its finances” and resume growth because today’s leaders owed it to future generations.

The former European Union competition commissioner received the formal mandate from President Giorgio Napolitano. Mr Monti must now draw up a Cabinet, lay out his priorities and see if he has enough support in Parliament to govern effectively.

Angelino Alfano, head of Mr Berlusconi’s conservative Freedom People party, said he told Mr Napolitano that Mr Monti has his party’s “consensus” to try to form a government.

But whether Mr Berlusconi’s forces will give Mr Monti crucial support in Parliament depends on who he chooses for his Cabinet and what his priorities will be.

Mr Alfano added the condition that a Monti government cannot last longer than the time needed to implement economic reforms. Mr Berlusconi and his supporters have made it clear they want elections soon.

But Umberto Bossi said his Northern League party would not back any government led by Mr Monti, who faces the monumental task of preventing an Italian default that could tear apart the coalition of 17 countries that use the euro and send Europe and the United States into new recessions.

Italy’s economy is hampered by high wage costs, low productivity, fat government payrolls, high taxes, choking bureaucracy, and an educational system that produces one of the lowest levels of college graduates among rich countries.

In addition, as the third-largest economy in the eurozone, Italy is considered too big for Europe to bail out like it did Greece, Portugal and Ireland.

Italy debts stand at 1.9 trillion euros (£1.63 trillion), or a huge 120 per cent of economic output. In addition, Italy has to roll over more than 300 billion euros (£256bn) of its debts next year alone.

A spokeswoman for the Treasury said in response to the developments: “As the Chancellor has said, the crisis in the eurozone is a danger to all economies, including ours. Today’s parliamentary vote in Italy is a welcome step.”

Prime Minister David Cameron has warned of difficulties for the UK as a direct result of the “big question mark” over the eurozone, declining to rule out a “double-dip” return to recession. The Prime Minister is expected to travel to Berlin next week for face-to-face talks with German chancellor Angela Merkel who is under increasing pressure to approve European Central Bank intervention.

But he came under renewed attack from Labour yesterday, with Shadow Chancellor Ed Balls, MP for Morley and Outwood in West Yorkshire, renewing accusations that Ministers are using the crisis as a cover for failing to stimulate growth and jobs in the UK.

Labour is calling for tax breaks for small business, a temporary VAT cut and a bank bonus tax to fund jobs for young people as part of a five-point plan which it will promote around the country this week.

The campaign will kick off on Wednesday when the Commons begins a short break – meaning Mr Cameron will not face his weekly question time session on the day the latest unemployment figures are released.

Writing on his blog, Mr Balls said: “Britain faces an economic emergency, but out of touch ministers are just sitting on their hands and blaming everybody but themselves.”

He went on: “By reckless cutting of spending and raising taxes too far and too fast, our economy has now flatlined for a year, leaving us badly exposed as this eurozone crisis deepens.”

The advance in Italy came a day after new Greek prime minister Lucas Papademos took control of an interim coalition government after days of intense wrangling following the departure of George Papandreou.