Europe may accelerate a shift away from its austerity-firstagenda this week as the new Italian government changes course and aGerman-Spanish investment pact underscores a renewed focus oncombating record unemployment.

Yesterday's swearing in of Italian Prime Minister Enrico Lettaends a political deadlock nine weeks after voters rejected thecountry's budget-cutting course. German Finance Minister WolfgangSchaeuble, a champion of austerity, will travel to Spain today tounveil a plan aimed at spurring investment in Spanish companies.Later this week, the European Central Bank may also cut interestrates at a meeting.

“You have to react to economic developments — we do so inGermany,” Schaeuble told members of Chancellor Angela Merkel'sChristian Democratic Union in Berlin last week. “We are notbureaucratic; we are not stupid.”