Story highlights
NEW: Berlusconi's coalition partner has agreed to pension reforms, media reports say
NEW: The agreement averts a potential collapse of the Italian government
Berlusconi will attend a summit of European leaders in Brussels Wednesday
Italy's high debt and low growth have sparked concerns
Italian Prime Minister Silvio Berlusconi’s government averted a potential crisis over economic reforms after reaching a deal Tuesday with its main coalition partner, Italian media reports said.
Ministers had warned the government could collapse after the Northern League rejected Berlusconi’s pension reform proposals, which would raise the retirement age by two years to 67.
European leaders have pressed Italy, which is among a handful of European nations at the center of a debt crisis, to agree to reforms before heads of government from all 27 members of the European Union meet Wednesday in Brussels.
European leaders say they’re making progress, but how much?
Northern League leader and minister for reform Umberto Bossi told Italian media late Tuesday that his party had reached a deal on the reforms, although he remained pessimistic, he said.
Bossi had earlier told reporters the government was dangerously close to a collapse. “It’s a dramatic moment. That is how I would describe it,” he said.
Asked why his party opposed Berlusconi’s proposals, he replied: “‘We cannot raise the pension age to 67. They would kill themselves.”
Infrastructure Minister Altero Matteoli also said there was a danger Berlusconi’s center-right government could fall, in comments broadcast by Italian media.
President Giorgio Napolitano called for the reforms to be delivered Tuesday, ahead of Wednesday’s summit, in a communique from the presidential palace.
Berlusconi, who will go to Brussels Wednesday, is expected to issue a letter later outlining his government’s plans for economic reform to stimulate growth, as requested by the EU and European Central Bank .
The latest meeting of leaders follows a summit at the weekend at which France’s Nicolas Sarkozy and Germany’s Angela Merkel accused Berlusconi of doing too little to cut spending and boost Italy’s sluggish economy.
EU politicians said Tuesday they are making progress on a comprehensive plan to tackle the eurozone’s debt and banking crisis.
They have promised to deliver an ambitious and durable solution to a crisis that poses the biggest threat to the euro since the common currency was launched over a decade ago, but the details have not yet been spelled out.
The latest talks have focused on a three challenges: restructuring the Greek government’s crushing debt load, strengthening European banks and boosting the effectiveness of a limited rescue fund.
Italy, the 17-nation eurozone’s third largest economy, has one of the largest bond markets in the world, worth an estimated 2 trillion euros (about US$2.8 trillion).
And while Italy is in much better shape than Greece, the Italian economy has been ailing for years and the nation has debts equal to about 150% of its economic output.
It passed a package of austerity measures last month, including tax increases, but some economists fear that without further reforms its debts could become overwhelming – and there would not be enough money in the European rescue fund to bail it out.
Many Italian newspapers ran editorials Tuesday describing this as one of Berlusconi’s worst political crises since he took office in May 2008.
The prime minister won a vote of confidence in the lower house of parliament by a slim 15-vote margin earlier this month. It was prompted by unhappiness over his handling of the economy and a series of personal scandals.
CNN’s Hada Messia contributed to this report.
