The BBC's David Willey, in Rome, says the new government has to deal with a rapidly declining economic situation, rising unemployment - particularly among the under-35s - and lack of growth, despite some draconian austerity measures passed by the previous government of technocrats.

BBC: New Italian 'grand coalition' government sworn in

Having served as finance minister in the previous administration, the new president campaigned on a platform of economic reform, improving the security situation, combating piracy and corruption, as well as criticism of allegedly illegal oil deals signed by his predecessor.

BBC: Puntland profile

W. David Montgomery, senior vice president at Nera Economic Consulting, a New York firm, summed up the situation quite clearly in testimony at a November 2nd congressional hearing.

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The talks are being held against the backdrop of what appears to be a steadily deteriorating economic situation, highlighted by thousands of new private sector job cuts and record low consumer confidence.

CNN: Obama tells GOP no compromise on tax rebates