ATHENS, Greece — Europe's financial crisis eased Thursday as Greece installed a respected economist to replace its prime minister and Italy appeared poised to do the same — both hoping that monetary experts can do better than the politicians who drove their nations so deeply into debt.
The announcement in Athens — and the prospect that Italian Prime Minister Silvio Berlusconi will be ushered out soon — quieted market fears, at least for now, that turmoil in Europe could threaten the global economy.
But significant challenges remain in both debt-heavy Mediterranean countries.
Greece's new Prime Minister Lucas Papademos, a former vice president of the European Central Bank, must quickly secure the crucial loan installment without which his country will go bankrupt before Christmas, and approve the EU's $177 billion bailout deal.
In Italy, lawmakers have to pass new austerity measures in the next few days. However, expectations that respected economist Mario Monti will lead an interim technocratic government after Berlusconi goes helped lift the gloom.
Italy's borrowing costs shot up alarmingly Wednesday to 7.4 percent on fears that Berlusconi would linger in office. But the markets calmed Thursday when it appeared that changes would be swift.
Monti, 68, now heads Milan's Bocconi University, but he made his reputation as the European Union competition commissioner who blocked General Electric's takeover of Honeywell.
European and U.S. stock markets rose on the twin Greek and Italian developments, and the euro was also trading higher.
Still, the European Union warned that the 17-nation eurozone could slip back into "a deep and prolonged" recession next year amid the debt crisis. The European Commission predicted the eurozone will grow a pallid 0.5 percent in 2012, much less than its earlier forecast of 1.8 percent. EU unemployment was forecast to be stuck at 9.5 percent.
Europe has already bailed out Greece, Portugal and Ireland — but together they make up only about 6 percent of the eurozone's economic output, in contrast to Italy's 17 percent. Italy, the eurozone's third-largest economy, is considered too big for Europe to bail out. It has a mountain of debt — $2.6 trillion — and a substantial portion of that needs to be refinanced in the next few years.
The new Greek Cabinet will be sworn in today. There has been no announcement on its composition, and officials said negotiations continued late Thursday.