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Ex-European commissioner Mario Monti came under intense pressure on financial markets on Monday as he rushed to form a new government within days to lead Italy out of an alarming debt crisis rocking the eurozone.

The technocrat launched talks with political leaders set to conclude on Tuesday but has already won endorsements from Italy's main parties and big business since being nominated to replace prime minister Silvio Berlusconi.

He is under intense pressure from the international community to fill the political vacuum in Rome and implement key economic reforms and according to newspaper reports is aiming to forge the cabinet within 48 hours.

"Italy must again be and must increasingly be an element of strength, not weakness in a European Union that we helped found and in which we should be protagonists," the 68-year-old Monti said after his nomination on Sunday.

He promised to move "with urgency" and push to boost Italy's growth.

President Giorgio Napolitano said he hoped the new government would be approved with a confidence vote in parliament by the end of the week, warning that Italy faced a tight timetable to avoid a blow-up of its giant debt.

After a positive start indicating investor approval of Monti, Italian stocks moved into negative territory in line with falls on other European markets.

Among those worst hit was Italy's biggest bank UniCredit, which announced it had suffered a 10.64 billion euro loss in the third quarter and will cut 5,200 jobs by 2015 in a sign the country is far from shaking off the crisis.

Borrowing costs on 10-year bonds fell to 6.352 percent -- below the 7.0-percent warning threshold breached last week, easing fears that Italy may follow Greece, Ireland and Portugal in needing a bailout.

Italy also paid less in a five-year bond sale on Monday -- 6.29 percent, down from Friday's 6.437 percent -- although the level was still far higher than before the start of the political crisis.

But an economics report from RBS Group bank said things in Italy were "still not moving quickly enough to quell fears about the collapse of the currency."

The toxic mix of a 1.9 trillion euro ($2.6 trillion) debt, an extremely low growth rate and high bond rates are keeping markets anxious.

The Sole 24 Ore financial daily said the markets were very uneasy and "any delay in forming the Monti government could be extremely dangerous".

"Even the slightest signs that Italy does not intend to do its utmost to reform its economy would likely be quickly illustrated in market prices," Jan von Gerich, chief analyst at Nordea Markets, told Dow Jones Newswires.

Berlusconi, whose resignation after a wave of market panic and the desertion of key allies was greeted by scenes of joy on the streets of Rome, gave his backing to Monti but has vowed a political comeback.

His People of Freedom (PDL) party has said it will tolerate the technocratic government for as long as necessary -- but has the power to unseat Monti.

The economist intends to stay on until the next general election which is currently scheduled for 2013 and has warned of "lots of sacrifices" ahead, according to political leaders who held talks with him on Monday.

Monti's nomination had been immediately applauded on Sunday by European Union president Herman Van Rompuy and European Commission head Jose Manuel Barroso who hailed it as an "encouraging signal".

"What I hope now is that in Italy there will be a necessary political consensus... If there is real consensus around this new government, I hope that confidence, that confidence of the investors will come back to Italy," he said.

A spokesman for EU Economic Affairs Commissioner Olli Rehn, Amadeu Altafaj, said Monday that "it is clear that our diagnosis for the Italian economy does not change (just) because there is a new administration".

The European Union, which together with the International Monetary Fund is now auditing Italy, has warned it may need to pass extra austerity measures.

Monti was set to meet with Italy's powerful trade unions on Tuesday.

He was the former top trust-busting bureaucrat in Brussels who famously took on, and won, cases against US giants Microsoft and General Electric -- but has never held political office.

Italy's top business leader Emma Marcegaglia -- head of the Confindustria employers' association -- said it was essential the government was formed soon to "turn its hand to reforms which are fundamental for a return to growth."

AFP