Former ECB vice president named as new Greek PM

Former ECB  vice president Lucas Papademos has been named as George Papendreou's successor as Greek prime minister, but Italy is still waiting to find out who will take over from Berlusconi.

After a fourth day of talks that saw one of the smaller parties walk out of discussions on Wednesday, the Greek president's office finally announced that Papademos (pictured) would become the new leader of a national unity government.

Papademos will now head an interim government that must ensure parliament approves the most recent eurozone bailout package to avoid the country going bankrupt by the end of the year.

A statement from the president Karolos Papoulias read 'After recommendations by political leaders who attended the meeting, has instructed Lucas Papademos to form a new government.' The new government will be sworn in at 12:00 GMT on Friday.

Papademos spoke after the president's announcement of the tough job he has ahead, saying it 'will not be easy but I am convinced the problems will be solved...in a quicker and more efficient way if there is unity and consensus.' First on his list of priorities is to pass the bailout package and then, according to Greek state TV, he will face a confidence vote before parliament on Monday.

Meanwhile in Italy, as 10-year bond yields continued to hover around the 7% mark and with talk of a possible eurozone break-up, the Italian president Giorgio Napolitano said that Silvio Berlusconi would step down 'within a few days' in an attempt to reassure markets.

Napolitano wanted to 'dispel any doubt or misunderstanding' about when the three-time prime minister would finally wave goodbye to the political scene.

Napolitano reassurred that in between, a financial stability law incorporating reforms would be approved soon, with Italian media believing the approval would come by Saturday. However, there is still major uncertainty over who would take the reins of power, although reports are emerging that former European commissioner Mario Monti could take control.

Markets sold off sharply yesterday as Italian 10-year bond yields rose, with the euro, equities and banking stocks taking a hit. While there has been some sign this morning of a slight calming, European markets remained jittery as worries persisted. The EU cut its growth forecast for the eurozone fown from 1.8% to 0.5% today, with European commissioner Oli Rehn declaring that 'growth has stalled in Europe and there is a risk of a new recession.'