A long, standing ovation greeted Italy's Mario Monti when he entered the packed Card Room on the seventh floor of the New York Stock Exchange last week.

But that does not mean all of the 200 people in the audience were ready to send their money to the Mediterranean peninsula.

In less than three months, the Italian prime minister has led a quick turnaround of Italy and its 1.9 trillion euro ($2.5 trillion) debt, implementing a tough pension reform, showing his ability and will to move Europe's third-largest economy ahead.

With his understated, toned-down style, he could not be further from the flamboyant theatrics of his predecessor, Silvio Berlusconi, which is just what Wall Street likes.

U.S. investors will need to see more action from the 3-month-old government to believe Monti's pledge that the Euro crisis is nearly over. Italy's reforms must continue at a quick pace and actually generate economic growth before their applause translates into investments.

A solid financial firewall must be established in Europe to prevent crisis from spreading, those who welcomed Monti to Wall Street said after he returned to Rome.

It's been impressive how quickly the sentiment has changed on Italy, said Charlie Himmelberg, managing director at Goldman Sachs, noting that the euro zone central bank had helped.

With the ECB's LTRO (Long Term Refinancing Operation) having removed much of the funding pressure on banks, the bigger risk now would be renewed sovereign concerns due to weaker-than-expected macro data. The recession in Italy is continuing; it is only a matter of how long and deep it will be.

We've been constructive on Italian bonds, but now that spreads have tightened, we are closer to fair value.

The spread peaked at 576 basis points in mid-November. Since then, the 10-year yield spread between Italian and German bonds, a measure of the market's perceived risk, fell to a low of around 345 points last week.

With Italy needing to refinance a massive 60 billion euros by April, bond experts say there is a real possibility of the spread widening again, or at least limited room for immediate further improvements.

In the best case the (10-year spread) can fall to around 200 basis points by the end of 2013, said Alessio De Longis, with the global debt team at OppenheimerFunds. For the Monti government, after its brilliant start, the toughest part comes now, he said.

REFORMS, GROWTH ARE ESSENTIAL

It is a good thing that Monti visits investors, said Blaise Antin, head of sovereign research at TCW, in Los Angeles. But plenty will ultimately depend on the Italian parliament and how it will back the tough choices ahead.

A key reform of the job market, aimed at making hiring and firing more flexible, is expected to be reached with unions by the end of March.

During his long stint in office, Berlusconi never met with foreign investors. He sometimes invited Italian businessmen to private dinners, but he left the head of the Treasury and his ministers the task of meeting with foreign business communities.

Lack of growth is the biggest risk Italy faces. The Bank of Italy said last week that Italian gross domestic product is expected to contract by 1.2 percent in 2012. The more the economy contracts, tax revenue will shrink, making it harder for the government to reach its goal of a balanced budget by 2013.

The danger is either missing the commitment or falling into a vicious cycle of further budget cuts and more recession.

Equities and fixed income investors may need time and more hard evidence before they move money into Italy, but some say spring has already arrived for niche sector venture capitalists.

I cannot talk about specific customers, but we noticed significant interest by strategic U.S. investors for particular activities in Italy right now, said Joseph Del Raso, a partner with law firm Pepper Hamilton LLP and president of the National Italian American Foundation.

More than two dozen people who attended Monti's Wall Street speech said they liked what they heard. At least he can express himself in proper English, said one woman, who declined to be named. Others applauded his jump-starting Italy's new government, but all agreed it is not enough to restore confidence in Italy.

Monti did not bring news, but his visit played an important role. We can now say: 'Look, things have changed. We now have competent and serious people leading our country,' said Gian Luca Clementi, economist at New York University.

Granted, the 200 and possibly more people in the boardroom at the NYSE last Friday were likely biased. A large number were members of the Bocconi Alumni Association of Milan's Bocconi University, where Monti taught for years. Others in the room and on the floor of the stock exchange were of Italian descent.

A trader who demonstrated the exchange's technology to Monti had the logo of Juventus, one of Italy's best-known soccer teams, attached to his identification badge.

He is capitalizing upon America's longstanding affection for Italy, said Steve Acunto, honorary deputy consul in New York. You cannot underestimate the presence in financial circles of people of Italian extraction who have affection for Italy.

That affection for Italy and Monti notwithstanding, it will take significant progress to turn it into hard cash.

(Editing by Dan Grebler)