Italy is facing a serious emergency, new Prime Minister Mario Monti said on Thursday as he promised rigour and fairness in painful reforms to dig the country out of a financial crisis that threatens the entire euro zone.

Making his maiden speech before an evening confidence vote, Monti said the survival of the euro partly depended on Italy embarking on radical reforms within weeks. The European Union is facing its most difficult challenge, he added.

The government recognises that it was formed to resolve a serious emergency, Monti said, outlining sweeping reforms to welfare, pensions and the labour market, that are expected to be unpopular.

Monti, who was sworn in on Wednesday at head of a technocrat government after a rushed transition from discredited ex-premier Silvio Berlusconi, said Italy risked having its fate decided by other countries if it did not act.

If it failed, things would get worse, especially for vulnerable members of the population.

The respected economist is rushing to end a collapse in market confidence that has pushed Rome's borrowing costs to critical levels.

The new premier said he would consider more reforms after implementing pledges made to the EU but never passed by Berlusconi. He denied the measures were imposed by Brussels.

Monti said action to vanquish an emergency that has put the euro zone's third economy at the centre of its expanding debt crisis would focus equally on cutting a huge public debt and boosting chronically poor growth.

He said the new government would target widespread tax evasion, sub-standard education and training and Italy's creaking welfare system as well as reforming a labour market that gives excessive protection to some workers at the expense of others, most of them young.

In a 45-minute address, he said the key goals of his technocrat government would be to improve public services and help women and young people to get jobs, calling them the two great wasted resources of our country.


Monti said he would reform the pension system to remove unfair disparities and also signalled the government would re-introduce a tax on first homes that was abolished by Berlusconi.

He would also sell off public assets, while lower taxes on labour and output would be balanced by higher levies on consumption.

Italy's notoriously closed professions would be opened up in a major campaign to liberalise the economy, he said.

In another shot at a chronic problem, Monti said the use of cash should be reduced to cut an underground economy that accounts for nearly 20 percent of GDP.

He promised to reduce the cost of Italy's political system and cosseted politicians, which caused increasing public outrage under Berlusconi's outgoing government.

Given the sacrifices required of citizens, action to contain the cost of elective bodies is unavoidable, Monti said.

He will seek a second confidence vote in the lower house on Friday.

He was comforted in his daunting task on Thursday by an opinion poll that said 73 percent of those surveyed believed he would be able to lead an extraordinary effort to fix Italy's problems. Even 60 percent of voters from the centre-right, the bloc which backed Berlusconi, said they had faith in Monti.

But there were early signals of the problems facing the new prime minister, who has taken the economy portfolio himself.

Fitch's rating agency said an economic downturn had already made his job more difficult, with rising unemployment likely to undermine support for austerity.

Berlusconi, after a few days of silence following his ignominious exit on Saturday, told deputies from his PDL party that the new unelected government was imposed on the country by President Giorgio Napolitano. He said it would last only as long as the PDL wanted.

Monti will need strong parliamentary support for radical reforms that has been promised by most of the parties, but could evaporate as the measures become more unpopular.

There was also opposition on the streets where thousands of people protested in several cities against what they called a bankers' government. Protesters clashed with police in the business capital of Milan and in Turin.

With the euro zone debt crisis spreading wider by the day, Monti's policies are unlikely to be enough on their own to rebuild shattered market confidence.

But they will be vital to restoring credibility with international partners who had long lost patience with the repeatedly unfulfilled promises of Monti's flamboyant predecessor Berlusconi.

The uphill task Monti faces was underlined by the continued surge in Italian bond yields.

Yields on 10-year bonds were over 7 percent, near the levels that forced Greece and Ireland to seek an international bailout, but which would overwhelm the euro zone's current financial defences if similar help was needed by Italy's much larger economy.

(Additional reporting by Steve Scherer; Writing by Barry Moody; Editing by Mark Heinrich)