Italy Will Vote on Austerity Measures

Italy's Senate is set to vote on austerity measures demanded by the European Union.

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[See a collection of political cartoons on the budget and deficit.]

Investors have fled from bonds issued by highly indebted countries. Luring them back by offering insurance on losses, the centerpiece of a plan agreed in Brussels on October 26, would now probably use up more of the fund's resources, Regling said.

"The political turmoil that we saw in the last 10 days probably reduces the potential for leverage. It was always ambitious to have that number, but I'm not ruling it out," the FT quoted him as saying.

In Athens, Greece's prime minister designate was set to name a new crisis cabinet on Friday to calm the political turmoil that has threatened to bankrupt Athens and force it out of the euro zone.

Greece's two main parties agreed on Thursday to make Papademos head of a new unity government, ending a chaotic search for a leader to save the country from default. He must now fulfill the terms of a 130 billion euro bailout plan agreed with European partners in October.

"The path will not be easy but I am convinced the problems will be resolved faster and at a smaller cost if there is unity, understanding and prudence," Papademos said on Thursday.

He was left working alone in his new prime ministerial office on Thursday night after talks on the new government ended with no sign of an agreement.

Sources in the two parties -- the ruling Socialists and the opposition New Democracy -- said Evangelos Venizelos was likely to remain as finance minister when President Karolos Papoulias swears in the new cabinet, scheduled for 1200 GMT (7 a.m. ET).

  • See a collection of political cartoons on the economy.
  • Read Rick Newman's lessons for Congress from the chaos in Greece.
  • Read how the crisis in Europe could drag down the United States.