Feb. 25 - Italian bonds yields are up after Italy's new Premier vowed to pursue economic reforms. But will Matteo Renzi be able to deliver on his ambitious pledges? Sonia Legg reports.
Grey flannel from Giorgio Armani - one of Italy's favourite designers. Milan fashion week is in full swing. The show puts Italy in the world's spotlight but this year there are other distractions - not least a new Prime Minister. Matteo Renzi has won his first confidence vote and is making big promises. (SOUNDBITE) (Italian) ACTING PRIME MINISTER MATTEO RENZI SAYING: "We need to sort out, before we take over our turn at the head of the European Union, the issues of employment, fiscal reform, public administration and justice." Italy's youngest Prime Minister wants to focus on jobs and reforms. Payroll taxes will be reduced to make it easier for companies to take on staff. He also wants to broaden unemployment benefit. But it all costs money says Neil Unmack from Reuters BreakingViews. (SOUNDBITE) (English): NEIL UNMACK, REUTERS BREAKINGVIEWS, SAYING: "Italy with its very tight deficit and its high debt is not really in a position to do that unless big cuts from elsewhere which means cuts in the public administration and probably pension reforms. Now Renzi has shown he has the appetite to take tough choices. He likes to talk about when he was mayor of Florence he cut the number of local administrators but really this is a totally different scale." Renzi hopes his choice of Economy Minister will help show his intentions are serious. Pier Carlo Padoan - a respected economist - was sworn in on Monday. But Rabobank's Jane Foley says investors still need convincing. (SOUNDBITE) (English): JANE FOLEY, SENIOR CURRENCY STRATEGIST, RABOBANK, SAYING: "If he fails to push ahead with reform and if he fails to promote a great a majority. We've seen he's won his first confidence vote but it wasn't with a great majority that his predecessor had at the end of last year. So we need to see those numbers up and we need to see support for him in parliament." Italy's bond yields rose on Tuesday as investors adjusted portfolios ahead of hefty sales. But Nick Parsons from National Australia Bank says there are broader reasons for the increase. (SOUNDBITE) (English): NICK PARSONS, HEAD OF MARKETS STRATEGY, NATIONAL AUSTRALIA BANK, SAYING: "We've had a huge amount of spread compression both in Spain and Italy relative to the core markets and I think it is reasonable to put some question marks into how long that can continue. I don't think this reflects a reappraisal of political risk, or an increase of political risk if anything it is the opposite." But Renzi's certainly taking political risks And unlike fashion Italy's establishment doesn't change quickly - Renzi's resolve is likely to be sorely tested in the coming months