Berlusconi's reign is over. Mario Monti might be the best choice for Italy. He would need a broad-consensus and the time to complete the reforms. The risk of a big failure is just around the corner. The euro currency could remain under pressure. However, a move above 1.4620 would take the price to 1.48 and eventually 1.52/1.58.

Mario Monti: A capable man.

"I will be choosing my team and will write the political agenda". Mario Monti is the new Italian Prime Minister. After years of bunga-bunga politics, Italy has appointed one of its most prestigious names. Monti is a former European commissioner, who understands Italian politics very well. He will lead a coalition of center-left parties. In effect, with Europe on the brink of collapsing, action must be taken quickly. The task is titanic, but is not impossible. Italians have the talent to score the winning goal during the last minute of the game.

Monti would need the support of the majority of the Italian parliament. The risk of failure is still around the corner. Within the P.d.L, Berlusconi's party, many are asking for new elections to take place early next year. The reign is over, but Berlusconi's influence on Italian affairs is still strong. He wants some of his men in key roles within the new coalition. Like a poker's player, he expects the maximum result out of the last deal. He could instead be remembered as the one who gave the final push to the shaking world markets.

Europe is still on probation.

There is no more time for political games. Italy should be able to pay the interest of its debt. Its primary balance has shown a surplus of 1.5% of the G.D.P. on average over the past 15 years. Nonetheless, could find some challenge refinancing more than Euro 300 billion of debt next year. So, Monti must implement the reforms as soon as possible. On Saturday, the budget bill has been finally approved by the Italian Chamber of Deputies. Among other things, it includes rising the retirement age for both women and men to 65 years of age by 2026. The labour law has not been touched. The E.U. and the I.M.F. will closely monitor Italy. The E.C.B. will keep on intervening in the secondary market.

A default is not an option. According to some analysts, banks exposure to Italy sovereign debt is almost euro 180 billion (20% of the total). The repercussion on the entire system will be enormous. It will probably mean the end of the Euro-zone. The Euro 106 billion calculated by the European Banking Authority (E.B.A. will not be enough to protect banks against sovereign defaults. Too many issues remain unresolved, in Europe. Lucas Papademos, a former E.C.B vice-president and ex-governor of the bank of Greece, will lead a broad-coalition in Greece. He has a "mission impossible" ahead of him. The hair cut and the rescue package might not be enough to avoid a Greece's default next year. In the mean time, European incertitude deepens the economic contraction. In September, both industrial production (-2.7% m/m) and manufacturing production (-4.3% m/m) fell in Germany. Domestic orders and economic activity are fading away.

The euro could remain under pressure over the short term. It could decline to 1.32 and eventually to 1.28. Nevertheless, a swing above 1.4620 would quickly lift the Euro/Usd to 1.48/1.52.