World markets dip as investors face cold reality

European markets fell today as initial relief over new governments in Greece and Italy gave way to the reality that those countries still face tremendous obstacles.

Technocrats have taken over in both Athens and Rome and have promised to institute the reforms required to keep their economies afloat.

In Greece, Lucas Papademos must persuade his country’s creditors to hand over the next instalment of the bailout that will keep it from defaulting. Many Greeks have fought the reforms demanded by creditors, protesting in the streets and making the country nearly ungovernable at times.

In Italy, Mario Monti needs to convince investors that a well-managed country can slash its debts and restart growth.

Mr Monti seemed off to a good start - the morning after he was installed and before he had a chance to do anything - when Italy’s bond yields dropped significantly in early trading.

They soon edged higher, however, as investors remained cautious about the country’s huge challenges ahead. The key 10-year borrowing rate was at 6.60%, up from Friday but still below last week’s worrying highs above 7%.

That caution extended to stock markets, where European indexes lost early gains to trade lower by late afternoon.

Wall Street fell on the open as well.

While investors are clearly relieved that experienced economists are in charge in two of Europe’s most fragile countries, reliable leadership is only the beginning: Reducing Italy’s mountain of debt in an era of stagnant growth is still a monumental task.