Nov 8 - Wall Street rallied one percent after Italy's embattled Prime Minister Silvio Berlusconi said he would step down after a current austerity budget passes parliament. Conway G. Gittens reports.
A night time drive to the Presidential palace - a likely signal that Italian Prime Minister Silvio Berlusconi's days are numbered. A note read by an official from the President's office delivered what many Italians were waiting to hear - Berlusconi agreed to step down after a new austerity budget, currently under work, is passed by lawmakers. Berlusconi later confirmed the statement in a TV interview with Canale 5. His fate appeared to be sealed earlier in the day, when the long-standing politician's ruling party lost its majority in parliament. And markets let their voice be heard, pushing benchmark Italian bond yields closer to the danger zone of 7 percent. Even if Berlusconi follows through and steps down, that doesn't mean the crisis is over, warns S&P Capital IQ New York-based global equity strategist Alec Young. SOUNDBITE: ALEC YOUNG, GLOBAL EQUITY STRATEGIST, S&P CAPITAL IQ (ENGLISH) SAYING: "The European bailout fund, the European Financial Stability Fund, is widely seen as still being too small to accommodate a bailout of Italy and the way interest rates are moving I think investors are getting increasingly concerned that Italy is going to go the way of Greece and that there is not enough money there to contain the situation. And so, just because you're getting a change of leadership in Italy does not really resolve the situation by a long, long way." But replacing Berlusconi is seen as a step in the right direction. SOUNDBITE: ALEC YOUNG, GLOBAL EQUITY STRATEGIST, S&P CAPITAL IQ (ENGLISH) SAYING: "One of the reasons that Italy is in such rough shape is because they have a very high level of debt, very slow growth and they've been really slow to embrace austerity and I think the market really blamed Berlusconi for that, so the feeling is let's get some new blood in there and that's bound to be a positive." A positive indeed, according to the markets. Wall Street ended the session with a gain of roughly one percent. Markets in Europe already had a positive finished before the Berlusconi resignation plans were announced. Conway Gittens, Reuters