The Italian political saga took another turn after both outgoing Prime Minister Mario Monti and former premier Silvio Berlusconi appeared at the European People’s Party meeting on the margins of the EU summit today (13 December) in Brussels.

The presence of the two Italians at the EPP gathering seemed to confirm Berlusconi’s intention to drop his candidacy to lead Italy’s centre-right coalition if Monti agreed to head the coalition in the country’s upcoming elections.

Monti, speaking in Brussels, refused to comment on his predecessor's offer. In October, the billionaire entrepreneur proposed for the prime minister to lead a coalition of moderates to campaign in the next elections, but Monti refused.

“If his position changes, I would have no problem with stepping back . . . I have no personal ambitions,” Berlusconi said at a televised book presentation in Rome on Wednesday (12 December).

But Monti, participating in the EPP pre-summit meeting, has cleared doubts regarding his intention to continue leading the country, if a centre-right coalition would win the next election.

Sources confirmed to Italian press agency Ansa that German Chancellor Angela Merkel asked Monti to run, with the campaign expected to start in February 2013. Along with Merkel, other centre-right EU leaders have thrown their support behind the man that has put Italy on the path to reform.

Fearing that Italy would go the way of Greece, Spain and other troubled eurozone countries, Merkel and other EU leaders were instrumental in pressuring Berlusconi to step down a year ago and turn over power to a technocrat government led by Monti.

Barroso praises Monti

“Significant measures have been taken over the past year to bring down its excessive deficit and tackle Italy’s high level debt," European Commission President José Manuel Barroso said at the end of a meeting with Monti.

"Considerable progress has been achieved to improve the country’s competitiveness and growth potential. We can see already very good results in the improvement of financing costs for Italy’s government bonds,” Barroso said. 

"The financing costs for Italy's 10-year government bonds have reached their lowest level since 2010. This is directly linked to the credibility of the government of Italy and the measures taken,” he continued, hinting at the fact that Berlusconi’s government had not been able to make the necessary reforms to lift the country out of the debt crisis.

French President François Hollande, a Socialist, also threw his support behind Monti. “Monti is the man who has allowed Italy to stand up and take a key role, and the fact that Italy is respected,” he said, entering the EU summit.

Italy’s political crisis was sparked last week after Berlusconi withdrew his support for Monti’s government. Monti announced he intended to resign only after the 2013 budget was approved.

Berlusconi's overture to Monti is likely to turn up pressure on the technocrat to outline his plans for the future and end speculation about a possible new Berlusconi government.

At the onset of the political crisis, markets have reacted negatively, with the yield on the 10-year Italian government bond standing at 4.5% at the end of last week. That was 323 basis points higher than the yield on the lower risk German equivalent, but well below the 7.3% peak hit last year when the spread with German Bunds hit 550 points..