Euro zone governments rushed to placate feverish bond markets on Monday as the 17-nation currency blocs debt crisis threatened to accelerate out of control.Reuters reported on Monday that Greeces outgoing Socialist prime minister and conservative opposition leader raced to put in place an interim national unity government for just long enough to save the country from imminent default by implementing a new bailout program.Former European Central Banks Vice-President, Mr. Lucas Papademos, was tipped to head a transitional cabinet charged with pushing the $170bn bail-out plan through parliament to secure a crucial eight billion euro aid tranche before early general elections in February.Whoever leads the temporary administration will face a monumental task in restoring order to a country of 11 million, whose chaotic economy and politics are shaking international confidence in the entire euro project.In Italy, Prime Minister, Mr. Silvio Berlusconi, defied huge pressure to resign as he struggled to hold a crumbling center-right coalition together after being forced to accept intrusive IMF surveillance of his economic reforms in an attempt to restore investor confidence.Political sources said leaders of Berlusconis PDL party had urged him to resign late on Sunday but he was resisting.A cabinet minister said Italy would face early elections if party rebels strip Berlusconi of his majority in a crunch vote on public finances in parliament on Tuesday.If we have the majority well carry on, otherwise therell be elections, Gianfranco Rotondi, a minister without portfolio, said after meeting Berlusconi at his Milan home.Italian government bond yields rose to their highest since 1997 - approaching levels seen as unsustainable - as the political turmoil in Rome threatened to drag the euro zones third largest economy deeper into regional debt crisis.In Paris, President Nicolas Sarkozys center-right government announced a new wave of austerity measures, bringing forward a rise in the retirement age, raising some taxes and de-coupling welfare benefits from inflation, in a drive to cling on to Frances top-notch AAA credit rating.The package designed to save 18.6 billion euros in 2012 and 2013 inflicted further pain on voters six months before Sarkozy is expected to seek re-election against a resurgent Socialist opposition, whose candidate, Mr. Francois Hollande, is far ahead of him in opinion polls.Prime Minister, Francois Fillon, said French public finances had been in the red for 30 years and the time had come to break with the damaging habit of spending beyond its means.Weve got to pull out of this dangerous spiral, he told a news conference.Finance ministers of the 17-nation currency area were set to accelerate the construction of a firewall to try to protect solvent but stressed economies in Spain and Italy from the fallout of a potential Greek default.At a meeting in Brussels later on Monday, they were due to discuss the Greek crisis and approve two options for leveraging the European Financial Stability Facility, to be put into action by the end of November, a month earlier than planned.Euro zone leaders agreed last month to scale up the rescue funds financial firepower to around 1 trillion euros by offering first loss guarantees on new bond issues, and attracting foreign investors through a special purpose vehicle with credit enhancements.Europes top economic official, Mr. Olli Rehn, said that while the European Commission had to be ready for all eventualities, there was no study being conducted of how a country could leave the euro zone, which is not foreseen in the EU treaty.We want to ensure that Greece can and will stay in the euro, he told the European Parliament.
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