Italian austerity approved

Italian Prime Minister Silvio Berlusconi is set to resign on Saturday after a crucial new austerity law was approved by the lower house of parliament. The new economic measures were passed by the Senate on Friday.

The Chamber of Deputies approved the measures by 380 votes for and 26 against. There were two abstentions.

The adoption of the law was set by Berlusconi as a precondition for his resignation after the premier lost his parliamentary majority earlier this week. An emergency transitional government will now be formed.

Berlusconi is expected to hand in his resignation to President Giorgio Napolitano later on Saturday.

The new law had been sought by the European Union to stave off bankruptcy of the eurozone's third largest economy as bond markets pushed Italy to the brink of a bailout the bloc could not afford.

Market relief

European shares ended the week higher on Friday, fueled on hopes that debt-laden Italy is finally taking active steps to stem an escalating crisis. The FTSE Eurofirst 300 index of leading European shares rose 2.1 percent to close at 983.73 points, led by Italian lender Intesa Sanpaolo, which climbed 8.8 percent.

Italian interest rates for government bonds dropped to 6.48 percent after dangerously exceeding the 7 percent barrier on Wednesday.

Mario Monti, a former European Union commissioner and a respected economist, is widely expected to form Italy's new transitional government now the reforms have been definitively approved.

Monti has received support from key Italian political and business leaders, but faced with some opposition in Berlusconi's center-right coalition, his attempts to form a government could still fail. Italian President Giorgio Napolitano would then be forced to dissolve parliament and call early elections.

Author: Charlotte Chelsom-Pill, Timothy Jones (AFP, Reuters, AP)
Editor: Andreas Illmer