Italian Premier Silvio Berlusconi promised Tuesday to resign after parliament passes economic reforms demanded by the European Union, capping a two-decade political career that has ended with Italy on the brink of being swept into Europe's debt crisis.
Italian President Giorgio Napolitano met for about an hour with Berlusconi after the premier lost his parliamentary majority during a routine vote earlier Tuesday. In a statement, Napolitano's office said Berlusconi had promised during the meeting to resign once the economic reforms have passed parliament.
A vote on the measures is planned for next week.
In the earlier Tuesday budget vote, Berlusconi did get enough support to pass it, but the result laid bare his lack of support in parliament as financial pressure from the eurozone debt crisis pummeled Italy.
The vote won 308 votes of approval and no votes against in the Chamber of Deputies. But 321 deputies abstained from voting, most of them from the center-left opposition. If all 630 lawmakers had voted, Berlusconi would need a 316-seat majority to assure he was still in command.
Analysts said Italy was reaching the point where Portugal, Greece and Ireland had been forced to seek a bailout. Yields on Italy's 10-year benchmark bonds rose to 6.74 percent on Tuesday before dropping back.
Finnish Prime Minister Jyrki Katainen said Italy was just too big to bail out. "It is difficult to see that we in Europe would have resources to take a country of the size of Italy into the bailout program," he told parliament in Helsinki.
Doubts on leadership
Earlier on Tuesday, Berlusconi's top ally called on him to "step aside" as uncertainty rocked the markets.
Italian news reports quoted Umberto Bossi from the Northern League as telling reporters that it's time for Berlusconi to resign and be replaced by another party leader from their coalition. Berlusconi has been resisting calls to resign for weeks.
Bossi has in the past expressed doubts on Berlusconi's ability to complete the current mandate. The Northern League as a whole has proven at times to be a difficult ally, exerting a strong independent streak and challenging Berlusconi on key policies.
The calls for Berlusconi to quit came as the country's borrowing rates spiked to their highest level since the euro was established in 1999.
The markets have turned their attention this week from the political crisis in Greece — where the two main parties were locked in talks Tuesday to forge a national unity government — to Rome.
Berlusconi's government is under intense pressure to enact quick reforms to shore up Italy's defenses against Europe's raging debt crisis.
However, a weak coalition and doubts over Berlusconi's ability to push through austerity and reforms have heightened the unease in financial markets that Italy could need financial aid.
What happens in Italy is a particular worry as it's the eurozone's third-largest economy.
At around euro1.9 trillion ($2.6 trillion), Italy's debts are considered by many in the markets as being too big for Europe to bail out, making the country a bigger risk for investors and pushing up interest rates.
Higher rates would make it more difficult for Italy to rollover its debts and would mean they consume more and more of national income.