The Italian stock market rose on Monday, boosted by the formation of a new government after two months of political impasse.

The FTSE MIB index climbed 2.2 percent as new Prime Minister Enrico Letta promised to push for a change to Europe's focus on austerity and pursue growth.

The country's borrowing costs on its five- and 10-year bonds, in the meantime, also dropped to their lowest level since October 2010 at a bond sale on Monday, while yields on 10-year debt in the secondary market fell 13 basis points to 3.93 percent, suggesting renewed market confidence in Rome's capability to overcome the current economic crisis.

Letta was backed by his own centre-left Democratic Party (PD), Silvio Berlusconi's centre-right People of Freedom (PDL) party as well as centrists led by former prime minister Mario Monti.

Key to the new cabinet are Economy and Finance Minister Fabrizio Saccomanni, and Minister of Labor Enrico Giovannini.

Giovannini is the president of Italian National Statistics Institute, ISTAT, and worked in the "10 sages" group appointed by Italian president Napolitano to help establishing a new government.

Meanwhile, Saccomanni, formerly director general of the Bank of Italy, is tasked with negotiating a better position in Europe for the Italian economy. In a recent interview he said that his key words are: fewer costs, fewer taxes, and more development.

"The government will obtain a kind of stability," said Andrea Delitala, manager of the Investment Advisory of Pictet Asset Management. Endi

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