David Einhorn, president of Greenlight Capital, speaks during the Sohn Investment Conference in New York, May 16, 2012.

NEW YORK | Fri Feb 15, 2013 7:14pm EST

NEW YORK (Reuters) - David Einhorn reiterated his arguments Friday that a judge should block a shareholder vote on Apple Inc's proposal to eliminate its ability to issue preferred shares without investor approval, days before a court hearing.

In court filings in U.S. District Court in Manhattan, Einhorn's Greenlight Capital attempted to rebut Apple's arguments that the company's proposal was "pro-shareholder."

"Apple should not be allowed to substitute its judgment for its shareholders' judgment, and should be enjoined" from letting the vote proceed, Greenlight said in a motion.

A hearing on Einhorn's motion for an injunction against the February 27 vote on the proxy proposal is set for Tuesday. A spokesman for Apple declined comment.

Greenlight sued Apple last week as part of Einhorn's larger effort to have the iPhone maker share more of its $137 billion in cash with investors.

As part of that goal, Einhorn has pushed for Apple to issue to its shareholders perpetual preferred stock with a 4 percent dividend.

Among the Apple proxy proposals up for a vote February 27 is Proposal No. 2, which would remove the company's current system of issuing preferred stock at its discretion without a shareholder vote.

Greenlight's lawsuit contends Apple violated U.S. Securities and Exchange rules by "bundling" three separate amendments to its charter into Proposal No. 2. While Greenlight supports two of the amendments, it does not back the one related to preferred stock.

Apple in a Wednesday filing argued the proposal was not bundled and that it had not forced shareholders into an unfair choice. It also noted Proposal No. 2 was supported by proxy advisory services Institutional Shareholder Services and Glass, Lewis & Co.

But Einhorn argued on Friday that ISS and Glass Lewis's support is premised on the belief that eliminating so-called "blank check" preferred stock powers enables a company to defend itself against a takeover.

"In my view, Apple is not a realistic take-over candidate because of, among other things, its enormous market capitalization," Einhorn wrote.

At Tuesday's hearing, U.S. District Judge Richard Sullivan will also hear a separate challenge by an Apple investor from Pennsylvania to block not just the Proposal No. 2 vote, but also an advisory "say-on-pay" vote on executives compensation.

The investor, Brian Gralnick, contends Apple has not disclose enough details about how it made its decisions in awarding restricted stock units to certain executives.

Apple responded that its disclosures were adequate and appropriate.

The case is Greenlight Capital LP, et al., v. Apple Inc., U.S. District Court, Southern District of New York, 13-900.

(Reporting By Nate Raymond; Editing by Leslie Gevirtz)

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Women walk out of an Internal Revenue Service office in New York April 18, 2011.

WASHINGTON | Thu Jan 17, 2013 11:02pm EST

WASHINGTON (Reuters) - Non-U.S. pension funds and mutual funds were spared the full brunt of new U.S. information-reporting rules on overseas accounts meant to catch Americans who dodge U.S. taxes by keeping their assets offshore.

Chiefly targeting banks, the Foreign Account Tax Compliance Act (FATCA) rules, published by the U.S. Treasury on Thursday, require foreign financial institutions with $50,000 of any American taxpayer's assets to report the holdings to the U.S. Internal Revenue Service.

The Treasury rejected a request by businesses, banks and foreign investment funds to delay a January 2014 start date for big penalties imposed on individuals and financial firms that do not comply with the law.

The announcement completes the rule-writing process for FATCA, a law that Congress passed in March 2010 after a Swiss bank scandal revealed that U.S. taxpayers had hidden millions of dollars overseas from the IRS.

Certain retirement funds, life insurance and other "low-risk" financial products held abroad that are not considered vehicles for dodging taxes are exempted from reporting their U.S. account holders' information to the IRS. Financial firms and foreign governments had been calling for these exemptions.

The law, the first of its kind globally, has been decried by companies and U.S.-ally countries as unilateral, over-reaching and a breach of privacy. U.S. law requires that Americans pay taxes on their global income, not just domestic.

Treasury officials are hoping to sign up more than 50 countries with FATCA agreements and kick-start a dragnet of tax enforcement.

"The real story here is that looks like it is going to become a global model," Manal Corwin, deputy assistant Treasury secretary for international tax affairs, told Reuters in an interview.

Companies affected by the new rules, including BlackRock, Western Union and Prudential, may spend more than $100 million each to comply with the law. Some firms are asking Treasury for additional time to prepare.

Financial institutions that refuse to comply with the law will be effectively shut out of U.S. securities markets.

The businesses must report to the IRS - in English - account holders' names, addresses, account balances plus dividends and interest. The first reports are due in 2015.

The roughly 500 pages of final rules, which were initially proposed in February 2012, give breathing room to some asset managers, such as mutual funds, for how they need to report investors' information.

Treasury has not started registering financial firms, but it must do so by July 15, 2013. The final rules said firms must register by October 25, 2013, to avoid next year's penalties.

The rules also incorporate the government-to-government agreements Treasury has been signing with countries to get their local firms compliant with the law. Norway became the seventh country to forge an agreement, Treasury said on Thursday.

GOVERNMENT PACTS

Soon after Congress passed FATCA, Treasury officials surmised the law could not be broadly implemented as intended. Too many foreign firms would be breaking domestic laws by reporting client information to the IRS.

The government agreements offer a workaround. The United Kingdom, Mexico, Denmark, Ireland, Switzerland and Spain are finalizing FATCA agreements.

Though the pacts help firms comply with FATCA, they have added new headaches for some international companies.

Some of the agreements include a reciprocal information-sharing provision, under which the IRS will deliver taxpayer information to a foreign government about its citizens living in the United States.

This reciprocal provision has raised privacy concerns, specifically with the Mexico agreement, signed in November.

Corwin said Treasury and IRS vetted the Mexican tax-collecting agency and checked with other U.S. agencies that share sensitive information with Mexico before signing the deal.

Foreign financial firms may be spared FATCA penalties next year if their native governments are on the verge of completing FATCA legislation, Corwin said.

Firms have been waiting for the final rules to finish their preparations, said Ellen Zimiles, a managing director for consulting firm Navigant. Firms may still get relief on the penalty start date as the deadline approaches, she said.

"It's always a little game of chicken" between Treasury and businesses, Zimiles said.

(This story corrects story to remove paras 18-20 as BlackRock executive comments were made before rules were published)

(Editing by Howard Goller, Steve Orlofsky, M.D. Golan, Gary Hill)

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A Samsung Galaxy Note II phone-cum-tablet is displayed during the first day of the Consumer Electronics Show (CES) in Las Vegas January 8, 2013.

HELSINKI | Fri Jan 18, 2013 3:45pm EST

HELSINKI (Reuters) - Samsung and Apple pulled ahead in the global smartphone race last quarter, according to forecasts by analysts in a Reuters poll, while Nokia and others are expected to have fallen further behind.

Overall shipments of handsets are expected to have risen in the fourth quarter, with most of that growth dominated by Samsung. Analysts forecast the South Korean company shipped 61 million smart devices, up 71 percent from a year earlier.

Samsung forecast earlier this month that it expected to earn a quarterly profit of $8.3 billion on strong sales of its Galaxy handsets as well as solid demand for flat screens used in mobile devices. Samsung's full results are due by Jan 25.

While some are wary that Samsung's momentum may slow in coming quarters owing to market saturation, it is still expected to outpace Apple as sales of the new iPhone 5 appear slightly weaker than originally forecast.

Apple is forecast to have shipped 46 million iPhones in the quarter, up 25 percent from a year earlier, according to the poll.

Shares in Apple dipped below $500 earlier this week for the first time in almost a year after reports it was slashing orders for screens and other components as intensifying competition eroded demand for the new iPhone.

The poll showed analysts expect Apple's full-year shipments to grow to 167 million this year from 134 million in 2012, while Samsung's shipments are expected to grow to 283 million smartphones in 2013 compared to 210 million in 2012.

NOKIA, RIM AIM TO CATCH UP

Nokia, once the world's biggest handset maker, is expected to have lost more market share. It is now pinning its recovery hopes on Lumia smartphones, which use Microsoft's Windows Phone software.

Analysts forecast Nokia's fourth-quarter shipments of mobile phones fell 15 percent to 80 million units while those of smartphones, including Lumias, fell 65 percent to 7 million units.

Nokia last week said it sold around 4.4 million Lumia handsets in the fourth quarter. Full results are due on Jan 24, and analysts are anxious to hear whether Nokia is confident that Lumia sales will continue to grow in coming quarters.

BlackBerry-maker RIM, another handset maker struggling to claw back market share, is expected to report a 30 percent fall in fourth-quarter shipments to 7 million units, the poll showed.

RIM is to launch new BlackBerry 10 smartphones later this month. The poll showed, however, that analysts expect its full-year sales to fall to around 30 million in 2013 from 33 million in 2012.

(Reporting by Ritsuko Ando; Editing by Sophie Walker)

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LONDON | Tue Oct 9, 2012 8:23am EDT

LONDON (Reuters) - A global supervisory body for securities has published its final recommendations for new rules for the $4.7 trillion money market fund sector despite opposition from its U.S. member.

The recommendations were called for by leaders of the world's top economies (G20) a year ago as part of efforts to crack down on "shadow banks" that also include hedge funds, special investment vehicles and repurchase agreements.

The International Organization of Securities Commissions (IOSCO) said the recommendations - which the body's regulatory members such as Britain's Financial Services Authority will apply locally - cover valuations, liquidity management, use of ratings and disclosures to investors.

"Although money market funds, which provide a significant source of credit and liquidity, did not cause the crisis, their performance during the 2007/08 financial turmoil highlighted their potential to spread or even amplify a crisis," IOSCO said in a statement.

Some regulators worry that as traditional banks become more heavily regulated, risky credit activities will shift to shadow banks which are currently less regulated.

IOSCO's 15 recommendations supplement reforms already introduced in the United States and Europe in 2010. It will review within two years how they are being applied.

The industry says money market funds are safe and don't need more rules.

Most of the commissioners from the U.S. Securities and Exchange Commission (SEC), an IOSCO member, opposed the publication of the global watchdog's recommendations.

In August, the SEC commissioners blocked U.S. proposals to introduce more rules for the money market funds sector on top of those already implemented in the United States in 2010.

IOSCO said that apart from U.S. opposition, there were no other objections to it publishing the recommendations on Tuesday.

The watchdog's members, who also include Bafin of Germany and Japan's Financial Services Agency, regulate more than 95 percent of the world's securities markets and are required to implement agreed rules.

(Reporting by Huw Jones; Editing by Laurence Fletcher and David Holmes)

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Traders work on the floor of the New York Stock Exchange September 18, 2012.

NEW YORK | Sun Oct 7, 2012 5:26am EDT

NEW YORK (Reuters) - Wall Street may be bracing for a pullback as U.S. earnings season begins next week - if the clouds of profit warnings from bellwethers ranging from FedEx to Hewlett-Packard lead to a downpour of lower profits - or even losses.

Thanks to aggressive stimulus plans from central banks around the world, the Standard & Poor's 500 index .SPX gained 5.8 percent over the third quarter. That sharp rally occurred even as companies were struggling. Earnings for that period are forecast to fall 2.4 percent from the year-ago quarter. If that happens, this would be the first earnings decline in three years, according to Thomson Reuters data.

Market strategists and investors say U.S. stock valuations are broadly out of sync with earnings estimates. They forecast a pullback in stocks in the coming weeks as more companies report results and reduce expectations for the fourth quarter and beyond.

Fourth-quarter estimates for S&P 500 companies show a 9.5 percent gain in profit from a year ago, according to Thomson Reuters data. Analysts say that outlook is too high, given what investors are already hearing from the corporate world.

"It's a divergence right now where the valuations as far as equity prices (are concerned) have soared, and are really putting in place a stronger economy and stronger fundamentals," said Alan Lancz, president of Alan B. Lancz & Associates Inc., an investment advisory firm in Toledo, Ohio.

"But earnings will be the telltale sign," Lancz added. "And if the guidance isn't particularly strong, the market might be setting itself up for a little disappointment. I don't see a major correction, but I do see a pullback."

The earnings season will kick off on Tuesday with results from Dow component Alcoa (AA.N) after the bell. Analysts expect Alcoa's third-quarter results to show it broke even, down from a profit of 15 cents per share a year earlier, according to Thomson Reuters I/B/E/S. [ID:nL1E8KQHC5]

JPMorgan Chase & Co (JPM.N) and Wells Fargo (WFC.N), the first big financial names to report, are also on tap next week.

BLAME EUROPE

Nearly half of S&P 500 companies guiding lower for third- quarter earnings blamed weakness in Europe, according to a Thomson Reuters survey. Another 11 percent blamed the weak global economy, 8 percent cited strength in the U.S. dollar, and 6 percent cited the slowdown in China, the survey showed.

Weakness in the U.S. economy hasn't helped. The final read on U.S. second-quarter gross domestic product last month showed growth of just 1.3 percent, weaker than an expected 1.7 percent.

On Thursday, software maker Informatica Corp (INFA.O) issued a profit warning and said business conditions were worsening in Europe. The software company is considered a bellwether because its products are used alongside those made by larger software companies. [ID:nL3E8L44YO]

"Parts of Europe aren't just in recession, they're in depression," said Jeff Kleintop, chief market strategist at LPL Financial in Boston. "I think (analysts) underestimated the extent of the global slowdown, and maybe are still underestimating it."

TECH FEELS CHILL FROM CHINA

While estimates have come down sharply in all 10 S&P 500 sectors since the start of the year, technology is one area where the lower expectations are most notable. Slower growth in China is a big factor in that trend.

Earnings growth in the tech sector is expected to be just 2.3 percent for the quarter, compared with a July 1 forecast of 13.1 percent. Apple Inc (AAPL.O) is a big driver of those gains.

Technology's profit growth has been crucial for the S&P 500. Minus technology, S&P 500 earnings are expected to be down 3.4 percent.

The tech sector is where the slowdown in China's economy is having the biggest impact, Kleintop said.

"They consume a lot of U.S. technology products," he said.

Recent data shows that the pace of growth in China, the world's second-largest economy, may slow for a seventh quarter, straining earnings in the tech and materials sectors. [ID:nL1E8L4DUF]

Applied Materials Inc (AMAT.O) lowered its third-quarter estimates in August, citing China and Europe. On Wednesday, the chip gear maker said it planned to cut its global work force by 6 percent to 9 percent.

FedEx Corp (FDX.N), the world's second-largest package delivery company, cut its fiscal 2013 forecast on September 18, saying a weakening global economy gives its customers a reason to switch to less expensive and slower shipping options. FedEx said its earnings could drop as much as 6 percent for its fiscal 2013 year, which will end in May. [ID:nL1E8KI5V0]

On Wednesday, shares of Hewlett-Packard Co (HPQ.N) fell a whopping 13 percent to a nine-year low after it forecast a far steeper-than-expected drop in 2013 profit. The slide in HP's stock price sharply cut the Dow industrials' gains for the day. [ID:nL1E8L39JP]

The S&P 500 sectors showing the biggest projected earnings decline are materials, forecast down 24 percent, and energy, expected down 18.8 percent, Thomson Reuters data show, with those declines tied largely to the global slowdown.

In contrast, consumer discretionary stocks are expected to have the strongest profit growth for the quarter, with Thomson Reuters data showing a gain of 7.7 percent. But in that sector, too, companies, including apparel retailer Express Inc (EXPR.N) - not an S&P 500 component - have warned about the third quarter. [ID:nL3E8L26XS]

ANEMIC REVENUE OUTLOOK

With tepid revenue growth, U.S. companies have been topping Wall Street's earnings expectations in recent quarters through cost reductions. That path to beating profit forecasts, however, will become increasingly difficult as many companies have already made most of the obvious cuts.

"Forward expectations are just too high," said Barry Knapp, managing director of equity research at Barclays Capital in New York.

Revenue for the third quarter is expected to be down 0.1 percent from a year ago for S&P 500 companies, and down 0.4 percent minus Apple, Thomson Reuters corporate earnings research analyst Greg Harrison said.

In all, the negative-to-positive ratio for earnings forecasts is 4.3 to 1, the most negative since the third quarter of 2001, he said.

Tech and materials were also among sectors with the most negative outlooks for the quarter, with tech's negative-to-positive guidance at 5.4 to 1 and materials at 7 to 1.

Corporate America's concerns were exemplified by General Electric Co (GE.N) Chief Executive Jeff Immelt, who told a meeting of analysts and investors last week: "I think the United States is OK. Europe, we remained concerned about. Asia - our part of Asia, particularly China, is not that bad."

(Reporting by Caroline Valetkevitch; Additional reporting by Steve James and Chuck Mikolajczak in New York and Scott Malone in Boston; Editing by Tiffany Wu and Jan Paschal)

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Greek and others European national flags flutter near an euro symbol outside the EU Parliament in Brussels August 30, 2011.

BRUSSELS | Sun Oct 7, 2012 6:54am EDT

BRUSSELS (Reuters) - Debate about the idea of creating a separate budget for euro zone countries is intensifying in the run up to an EU summit later this month, with less opposition to the proposal than many officials first expected, diplomats say.

At a private dinner held last week among the EU ambassadors of several northern European countries, including Britain, Denmark, the Netherlands and Finland, those present were surprised to find a fair degree of consensus on the proposal.

"I wouldn't say that there was strong support for it, but there was certainly a feeling that this is an idea that should be explored in more detail," said one diplomat briefed on the discussion that took place at the gathering.

The single budget proposal was first sketched out by Herman Van Rompuy, the president of the European Council, in a paper circulated in September as part of an effort to stimulate debate about how Europe's monetary union should be improved.

In the paper, Van Rompuy said a "fully fledged fiscal union" among the 17 countries that share the euro could involve the creation of a single treasury office and "a central budget whose role and functions would need to be defined".

Those suggestions have since been refined into guidelines that will form the basis of discussion among EU leaders at the summit on October 18-19. The idea will also be explored among euro zone finance ministers at a meeting in Luxembourg on Monday.

There is still no clear definition of what a single, central budget would entail, but Germany strongly supports the idea and France is on board too, which in terms of euro zone decision-making means it has substantial momentum.

Britain's support, underlined by Prime Minister David Cameron on Sunday, is also significant, even if it stems more from a desire to distance Britain from the problems of the euro zone than from any solidarity with the single currency club.

"There will come a time when you need to have two European budgets, one for the single currency, because they are going to have to support each other more, and perhaps a wider budget for everybody else," Cameron told the BBC on Sunday, the first day of his Conservative Party's annual conference.

"I don't think we will achieve that this time, but it is an indicator of the way that Europe is going," he said.

SINGLE EURO ZONE BUDGET

While conceptually it may make sense for the countries that share one currency to also create a single budget, it immediately raises thorny questions about sovereignty, budget discipline and long-term ambitions.

Germany's precise ideas about how a single budget would be financed, managed and employed are likely to be vastly different from Portugal's, Estonia's, Italy's or France's once leaders and finance ministers get into the nitty-gritty of the concept.

Yet there are already some broad proposals doing the rounds, including the idea -- backed by France -- that the budget could be financed by revenue from a financial transactions tax (FTT).

Germany and France are already driving an initiative to establish an FTT among nine euro zone, the minimum number permitted to do it alone. There is already support from eight countries and a ninth could come on board as soon as next week, giving added impetus to the plan.

But other euro zone countries that might like a single budget, such as Finland, are lukewarm on the idea of an FTT, underscoring just how complex negotiations could become.

There are also differences of opinion about why a single budget is desirable. Germany sees it as a means of building solidarity and tightening budget rules without moving to the more extreme suggestion of mutualizing all euro zone debt.

France sees a single budget more as a means of ironing out divergences in social and employment policy, arguing that it could be used to help underwrite unemployment benefits in a country suffering from much higher joblessness than the rest.

While many countries are voicing quiet support for the idea, it is also clear that most have a conflicting take on what it would involve if it were ever to become a reality.

Some have hinted that it could involve each country setting aside a fraction -- 0.3 or 0.5 percent of their GDP -- for a communal budget, others dismiss that suggestion out of hand.

"The modalities are completely unknown," said one EU official when asked how a single budget might work.

What's more, even if momentum is growing and it is likely to be a core part of discussions at the October 18-19 summit, it could be years before it becomes reality even if everyone supports it.

Such a fundamental change to how the euro zone is administered would more than likely require a change to the EU treaty, a long, complex and divisive process.

The treaty has already been tinkered with since the debt crisis began and there is a reluctance to open it up again.

Even if German Chancellor Angela Merkel were to support treaty change, it's unlikely she would want to do it until after Germany holds elections in September next year.

But there are also European Parliament elections in June 2014 and most analysts of euro zone politics do not expect it to be possible to drive through substantial treaty change until after that, meaning it may only happen in late 2014 or 2015.

(Additional reporting by Guy Faulconbridge in Birmingham and Robin Emmott in Brussels, Writing by Luke Baker; editing by Ron Askew)

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Traders work on the floor of the New York Stock Exchange, July 10, 2012.

NEW YORK | Sat Sep 29, 2012 4:17am EDT

NEW YORK (Reuters) - Wall Street will open October with a busy week, highlighted by low expectations for global manufacturing data and the U.S. jobs report, but that could set the stage for positive surprises that help lift the market.

The S&P 500 .INX.SPX finished its third positive quarter in the last four on Friday, despite suffering its largest weekly percentage decline since June. For the past three months, the S&P 500 gained 5.9 percent - its best third quarter since 2010. In contrast, the index was down 1.3 percent for the week.

The benchmark S&P 500 earlier this month reached its highest level since late 2007. Yet uncertainty remains over whether stocks can hold their gains against the headwinds of a struggling economy. That explains, in part, the retreat over the last several days.

The S&P 500 hit a high of 1,474.51 in mid-September before pulling back by a bit more than 2 percent. A run at 1,500 seems possible, but the flurry of economic and world events ahead probably will prevent a major advance in the coming week.

Bulls are betting this week's Spanish budget proposals will be a preamble to a bailout request by Mariano Rajoy's government. The move would be seen as a first step to get the finances of the euro zone's fourth-largest economy in order and would clear some of the market uncertainty regarding the euro zone crisis.

Monetary policy is also on the list of market catalysts next week. Federal Reserve Chairman Ben Bernanke is scheduled to speak on Monday and the minutes of the latest FOMC meeting are set for release later in the week. The week's agenda includes meetings of the European Central Bank, the Bank of England and the Bank of Japan.

"I think we could see a rebound next week if we get some of the stars aligning and have Spain ask for a bailout, the ECB announcing favorable terms for that bailout, and if we see the Bank of Japan announce further monetary intervention," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

"If Spain and the ECB don't deliver, we could set ourselves up for a further lateral move in the markets. A negative would be if Rajoy flat-out denies that they need a bailout."

The ECB and BOJ are set to meet on Thursday, with the Bank of Japan's meeting extending until Friday.

FACTORIES, JOBS AND THE DEBATES

Chinese factory and business conditions data will kick off a numbers-heavy calendar for markets. Manufacturing PMI, due on Monday, is expected to show a second straight month of contraction.

A snapshot of U.S. manufacturing activity will be provided on Monday when the Institute for Supply Management releases its September index. The September ISM reading is expected to show another month of contraction, but at a slightly slower pace than in August. On Wednesday, the ISM will release its U.S. services-sector Purchasing Managers' Index, which could show a slight deceleration in the pace of growth in the non-manufacturing sector.

"We have Chinese economic data over the weekend, and we'll see how markets react on Monday," said Wasif Latif, vice president of equity investments at San Antonio, Texas-based USAA Investment Management.

"It seems like the market is bracing for bad numbers, meaning if they're not as bad, it could be market-positive," Latif said.

Non-farm payrolls for September, due on Friday, are seen up 115,000, while the U.S. unemployment rate is seen ticking up 0.1 percent from August to 8.2 percent in September.

The jobs data will come on the heels of the first of three U.S. presidential debates, scheduled for Wednesday night. Recent poll numbers point to a strengthening lead by President Barack Obama, but a weak payrolls reading could give some hope to Republican challenger Mitt Romney.

"If Romney doesn't turn the ship with a very strong (debate)performance, the president is going to win," said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.

He said the trend in the polls has taken away some of the market uncertainty regarding the presidential election. He added that an ECB- or Spain-related headline out of Europe on Thursday could overcome almost anything that would happen Wednesday night during the debate.

"I think the market is coming to terms with the fact the president is ahead, and unless something significant changes, (he) will prevail."

(Wall Street Week Ahead runs every Friday. Questions or comments on this column can be emailed to: rodrigo.campos(at)thomsonreuters.com)

(Editing by Jan Paschal)

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HELSINKI | Thu Aug 2, 2012 6:37am EDT

HELSINKI Aug 2 (Reuters) - Italy's prime minister warned markets to give his country more credit for its fiscal reforms and said he favoured bold measures to tackle Europe's debt crisis, outlining a possible future policy path for the region as a key ECB meeting got under way.

Mario Monti, a technocrat drafted in after Silvio Berlusconi resigned as premier last year, said continued high borrowing costs for Italy could usher in a eurosceptic government that would renege on fiscal targets.

"I can assure you that if the (bond yield) spread in Italy remains at these levels for some time ... then you are going to see a... non euro-oriented, non fiscal discipline-oriented government taking power in Italy," he told a conference.

Italy's bond yields have stayed stubbornly high despite budget reform efforts steered by Monti, contributing to the pressure to match words with bold actions that European Central Bank President Mario Draghi is under after he pledged last week to do whatever it takes to save the euro.

Markets believe the main option on the table for the ECB is a resumption of its bond-buying programme, which would ease Spanish and Italian borrowing costs, though Reuters reported on Monday that that action could be weeks away.

Italy is due to hold elections next spring, which Monti has said he will not contest, but disagreements within the ruling coalition - in part over the cost of implementing tough austerity measures during a recession - have prompted speculation the government could fall this year.

Centre-right leader Berlusconi, who has hinted he may run again for prime minister, has made several comments in recent months suggesting that Italy could consider quitting the euro zone.

Running the rule over further options for strengthening the single currency bloc, Monti said he strongly favoured jointly issued bonds but admitted other measures in support of a European fiscal union would have to be introduced first.

On Wednesday, he predicted the euro zone's ESM rescue fund would eventually be granted a banking licence, allowing it to tap unlimited resources through the ECB's liquidity operations.

Euro zone paymaster Germany is strongly opposed to both measures. Finland has also said it opposes common euro zone bonds.

Monti was visiting Finland as part of a campaign for concerted action by euro zone governments and the ECB to help bring down peripheral sovereign borrowing costs.

Italian 10-year bond yields were 14 basis points lower on the day at 5.94 percent.

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