Russia expressed confidence on Wednesday in Italy's ability to put its financial house in order, with or without Silvio Berlusconi as prime minister, but raised questions about the euro zone's strategy for containing its sovereign debt crisis.
Berlusconi said on Tuesday he would step down after parliament approves a budget law that includes reforms sought by Italy's European partners to help Rome stave off a debt crisis that is threatening the euro zone.
Russia holds over $500 billion in foreign reserves, the world's third largest. Of that, over two-fifths are held in euro zone sovereign debt.
The situation is difficult in Greece and Italy. But, as I understand it, Berlusconi will go only after the budget and financial stability measures are passed, Kremlin aide Arkady Dvorkovich told reporters.
Dvorkovich said the Italian plan is sufficient, adding that it will likely be approved by the euro zone and the International Monetary Fund, which is sending a mission to Rome.
But, repeating concerns expressed by cash-rich emerging markets, Dvorkovich voiced uncertainty over the way the European Financial Stability Facility (EFSF) will be expanded to backstop Italy, where borrowing costs have reached dangerous levels.
The euro zone is seeking to boost the EFSF to about 1 trillion euros from its present 440 billion euros this year.
The EFSF was originally designed to have a lending capacity of 250 billion euros -- enough to take care of Europe's smaller peripheral economies but too small to rescue Italy should it struggle to refinance its 1.9 trillion euros in debts.
We do not fully understand how the EFSF will be topped up and will function ... We do not understand where the additional 750 billion euros will come from, Dvorkovich said.
That is one of the reasons why we are not ready to consider direct participation and prefer to go via the IMF.
The head of the IMF Christine Lagarde said a day earlier that Russia was willing to increase its financial backing for the fund as part of international efforts to help Europe out of the sovereign debt crisis.
If Europe takes clear decisions (on the EFSF), then we would consider participating, but that does not mean we would agree, Dvorkovich said.
When asked about whether the European Central Bank should support the EFSF, Dvorkovich said he did not see a problem if the ECB took a more active role and any inflationary risks of printing money to buy government debt would be acceptable.
(Reporting by Douglas Busvine; Writing by Andrey Ostroukh; editing by Anna Willard)