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Italian Prime Minister Monti's surprise resignation shakes investors (+video)

Analysts fear Prime Minister Monti's unexpected resignation could spark a new round of Italian political turmoil and slow efforts to shape up the eurozone's third largest economy.

By Greg KellerAssociated Press / December 10, 2012

Italian Prime Minister Mario Monti attends the World Policy conference in Cannes, southern France, last week.

Lionel Cironneau/AP

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Paris

European shares slumped on Monday as Italian Prime Minister Mario Monti's announcement that he will resign by year's end surprised investors and raised worries that political turmoil could derail Europe's effort to end its financial crisis.

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ROME (AFP) - Italy geared up for early elections on Sunday after Prime Minister Mario Monti said he will resign in the coming days and Silvio Berlusconi announced he will run again for the sixth time in two decades.

Widely credited with restoring confidence in Italy amid a debt crisis, Monti said over the weekend that he found it impossible to lead after former Prime Minister Silvio Berlusconi's party, Parliament's largest, dropped its support.

Analysts fear Monti's unexpected resignation could spark a new round of Italian political turmoil and slow efforts to shape up the 17-country eurozone's third largest economy.

Berlusconi resigned as premier last year amid sex scandals and legal woes, unable to convince international markets that he could balance Italy's budget and pass necessary financial reforms to save Italy from a Greek-style debt crisis. Monti, a respected economist and former European Union competition commissioner, was tapped to head a government of technocrats to guide Italy.

"This [Monti's] decision has clearly been met with anxiety in the markets, with Monti's government seen as imperative to Italy's stability," Craig Erlam, market analyst for London-based Alpari, said in a note.

Italy's main stock index, the FTSE MIB, was trading down 3.2 percent at 15,200.4 in late morning trading Monday. The interest rate on the Italian government's 10-year bond — an indicator of how risky investors consider a country's ability to pay down its debt — rose 0.30 precentage points to 4.52 percent.

Other European stocks also fell in early trading. Britain's FTSE 100 was down 0.2 percent to 5,899.96 while Germany's DAX slipped 0.5 percent to 7,478.38. France's CAC-40 dropped 0.6 percent to 3,585.08.

Wall Street appeared headed for a lower open, with Dow Jones industrial futures dipping 0.1 percent to 13,124. S&P 500 futures shed about 0.2 percent to 1,413.90.

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