ITALY - Mr Monti's appointment seemed a done deal earlier in the week, but two other candidates are now being openly discussed – Angelino Alfano, Mr Berlusconi's former justice minister, and Lamberto Dini, a former Bank of Italy official who headed a similar technocrat government during an earlier phase of political paralysis in the 1990s. Italy would be "playing with fire" if it proved unable to form a new government under Mr Monti and give him a clear mandate to enact the reforms, Corriere della Sera said in a front page editorial. Business leaders and most of the country's big unions launched a joint appeal for Mr Monti to be made the new prime minister in order to restore confidence in Italy's ability to cut its debt and calm the euro zone crisis. "By Monday, Italy must have a new emergency government, with a respected leader and the broadest possible consensus in parliament," their statement said. There are serious concerns in Italy that even if a Monti government could be formed, it could be brought down within months by political infighting and an inability to push through the deeply unpopular reforms, which have been demanded by the country's European leaders and the International Monetary Fund. "On the eve of Berlusconi's resignation, there is still great confusion," newspaper Corriere della Sera warned.
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Today, it's bonds you need to understand. The global bond market is worth $100 trillion (£62 trillion). That's around twice the size of the world's equity markets and a number so large it is scarcely comprehensible.
Last week, the bond market's so-called vigilantes turned their fire on Italy and, as with Greece before it, they quickly drove the cost of borrowing for its government to unsustainable levels. Yet again, the bond market forced politicians to think the unthinkable, casually stepping over every line they attempted to draw in the sand.
I think the markets are about to step over another critical line, forcing a rethink of the idea that the European Central Bank (ECB) is not the eurozone's lender of last resort. Until last week, it could plausibly pretend it was not, but the storm has blown across the Ionian Sea to a country that is peripheral only in terms of its geography.
What will trigger the hard-liners' capitulation, I think, is when the crisis ships up on Germany's borders, threatening catastrophic bond market losses on the banks and insurers that control the country's vast savings.
What does this mean for investors? Certainly, it means more volatility in the short term, although a quicker than expected move towards quantitative easing (QE) could create a painful spike for anyone sitting on the sidelines.
That said, capital preservation will be key and that means paying less attention to what a company does than how well financed it is.
Fortunately, many companies are in much better shape than their governments, and that is not always reflected in the prices of either their shares or bonds. Default rates could be lower than the market implies, which might make some high-yield bonds attractive. Meanwhile, the dividends on blue-chip shares provide good support.
Investors must also pay attention to where a company's customers are. Weaker global growth could help governments in countries like China and Brazil step back from monetary tightening as inflation dips again.
The long-term growth in consumption in those markets, which has been an unfashionable story this year, could gain momentum if risk assets come back into favour.
Finally, investors must begin to think seriously about the likelihood of inflation in developed markets becoming entrenched further down the track if and when there is more QE on both sides of the Atlantic. Time to extend that bond market education to index-linkers, I think.
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