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Umberto Bossi, head of the Berlusconi’s main coalition partner “Northern League” party, has called on Silvio Berlusconi to resign.

According to DJ, he even offered a replacement:  Angelino  Alfano.  This happens as the main opposition party decided to abstain in a vote preceding a potential vote of confidence.

5 or 6 members of Berlusconi’s PDL party don’t intend to support the government. Yesterday, Berlusconi denied talk about his imminent resignation, but his choices are becoming very limited.

Italian yields, for 1,2, 5 and 10 years remain at unsustainable levels. 10 year yields are at around 6.6%. At these levels and at current spreads with the benchmark German yields, there is fear that margins will be raised, triggering another sell-off.

An IMF mission will be sent to Italy to “help” the country, a member of the G-7 industrialized countries, to get its finances in order.

It seems that the markets want Berlusconi to step down as he cannot carry out the necessary reforms to sail Italy through the current crisis. But on the other hand, there are hardly any other serious personas who can take over. One candidate for a technocratic government is Mario Monti, but he’s no savior.

Eventually, another Italian can stabilize Italy: Mario Draghi, the new president of the ECB, who might find himself buying bonds quite massively and embark on QE.

EUR/USD remains range bound, between 1.3725 to 1.38. For more levels and analysis, see the euro/dollar forecast.

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