MILAN (AP) ? Premier Silvio Berlusconi's government teetered Thursday after its failure to come up with immediate growth measures to present to G-20 leaders in Cannes exposed growing fissures in the governing coalition and sent Italian borrowing rates again to dangerously high levels.
Berlusconi met with his Cabinet late into the evening in an attempt to agree on a decree that would give immediate effect to emergency measures. Instead, Berlusconi headed to Cannes with proposed legislation, requiring approval by a divided Parliament, which would, among other things, sell off government property and privatize a limited category of local public services.
The yield on Italy's 10-year bonds jumped to 6.4 percent on the secondary market at one point, 4.62 percentage points higher than the rate on the German equivalent bund. Speculation that the European Central Bank was back in the markets buying up Italian bonds took the yield back down to 6.17 percent.
The ECB has been buying up Italian bonds for weeks in an attempt to keep borrowing rates at manageable levels. Borrowing costs of 7 percent are widely considered unsustainable, which could cause a default on public debt. With a debt of euro1.9 trillion ($2.6 trillion), or 120 percent of GDP, second only to Greece, Italy is considered too big to bail out.
Berlusconi is under growing pressure to step down, although the Italian leader has insisted that his government will survive its mandate until 2013. Even his coalition partners, the Northern League, have cast doubt on that.
"It is difficult to avoid the impression that this government's time is numbered in days, or weeks, and that the legislature will finish at the beginning of 2012," Corriere della Sera, a moderate daily, wrote in a front page editorial.
President Giorgio Napolitano has been meeting with leaders of Italian parties to gauge the political temperature. In the event Berlusconi's government falls, it would be up to Napolitano to decide if a technical government or another of the center-right would run the country before new elections could be organized.
Napolitano sought to reassure Italy's partners and the markets, saying that both the majority and the opposition "are aware of the weight of the problems that Italy must confront with urgency." He said the next parliament vote would allow him to better evaluate the political situation.
The head of Berlusconi's party, Alfonso Alfano, insisted after meeting with Napolitano that Berlusconi has the majority to continue to 2013. But even he addressed the possibility of the government's failure, saying that new elections, and not a technical government, should be next.
Indeed, Berlusconi's influence showed more signs of fraying. Six Party of Freedom lawmakers signed a letter to Berlusconi saying they would no longer support him in parliament if he did not seek to build a national unity government ? a move that appears increasingly likely in Greece.
"You are aware, as is each of us involved in the daily work as deputies, that the current government does not have the consensus in parliament to achieve the difficult agenda of commitments taken in front of European institutions, the parliament and the Italian people," the six wrote.
The government has been further weakened by reports of discord on emergency measures between Berlusconi and his finance minister Giulio Tremonti.
After raising expectations of a decree, the government announced legislation reportedly after Napolitano suggested they would enjoy more legitimacy if passed by the full Parliament. They include amendments that include divesting government-owned real estate, privatizing local public companies, measures to encourage investment in infrastructure and liberalizing the labor market.
The measures must be approved by the end of the year, the government said in a statement.
The measures were outlined in a letter of intent to the European Union last week after coming under European and market pressure to come up with solid proposals to boost anemic growth. Doubts are growing that Berlusconi had the political muscle to push reforms through.
"Berlusconi has become a puppet in the Italian political theater," the speaker of the lower house and former Berlusconi ally, Gianfranco Fini, told state TV.
He urged Berlusconi to show his leadership by seeking a broad alliance to see the country through the crisis. But if Berlusconi continues the present course "Italians will judge him," Fini said.
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