Italy was plunged into political and economic turmoil Wednesday with borrowing rates hitting \"dangerous\" levels after Prime Minister Silvio Berlusconi said he would resign and not run for office again
Ten-year bond yields broke through the 7.0-percent threshold seen as unsustainable for refinancing of Italy\'s massive debt of 1.9 trillion euros ($2.6 trillion) as the head of state warned that the country\'s very credibility was at stake.
\"I won\'t run for office,\" Berlusconi told La Stampa a day after announcing he will step down once a key economic reform law is adopted in parliament, effectively announcing the end of a political career spanning two decades.
\"As soon as the reforms are approved I will resign... the procedure will be complete by the end of the month,\" the 75-year-old billionaire tycoon said.
Italian President Giorgio Napolitano, who will lead efforts to form a new government or call early elections after Berlusconi\'s resignation, voiced concern about the situation in the eurozone\'s third largest economy.
\"We have to regain credibility and trust as a country. Above all today we have to get out of a very dangerous crunch on our bonds,\" he said.
\"There needs to be new behaviour by political forces... A lot of closures and old taboos need to fall to get out of the critical and alarming situation we are in,\" he said in apparent reference to a possible unity government.
Italian stocks initially opened higher but later plunged by more than 3.0 percent, reflecting investor fears over the political uncertainty following a parliamentary revolt that precipitated Berlusconi\'s resignation announcement.
Shares in Berlusconi\'s Mediaset business empire, which were briefly suspended, dragged down the market and were down around 10 percent. Mediaset owns Italy\'s three main private television stations.
Investors have voiced fears that Italy could be the next victim of the debt crisis gripping Europe in the wake of Greece, Ireland and Portugal which have been forced to seek bailouts.
Among the options post-Berlusconi are an expansion of the current centre-right coalition, the formation of a national unity government or, failing other options, the dissolution of parliament and early elections.
\"Seeing as there isn\'t another possible majority, I see elections for the beginning of February, but I won\'t be running,\" Berlusconi said.
\"Now is Alfano\'s moment. He will be our candidate for premier,\" he said, referring to Angelino Alfano, a former justice minister who heads up Berlusconi\'s ruling People of Freedom (PDL) party.
Other possible candidates to replace Berlusconi identified by the press in recent days are former EU commissioner Mario Monti, former prime minister Giuliano Amato and Berlusconi cabinet secretary Gianni Letta.
Top-selling Italian daily Corriere della Sera said Berlusconi\'s \"slow-motion\" demise \"could introduce a degree of temporary ambiguity that would be destructive for a country exposed to months of financial speculation.\"
Il Messaggero said: \"He should have resigned immediately.\"
A Senate committee meanwhile met on Wednesday to discuss the proposed reform package to boost Italy\'s virtually stagnant growth rate, contained in a law with measures to boost competition in the labour market and encourage hiring.
The talks in parliament should also help lay out a timetable for expected final approval of the measures and therefore for Berlusconi\'s exit, with the centre-left opposition now calling for rapid adoption of the budget law.
Under the current timetable, the measures should be approved by the upper house next week and by the lower house before the end of the month.
European Union and European Central Bank officials also arrived in Rome for technical meetings as part of a special EU-IMF surveillance mechanism that Berlusconi agreed to under pressure at the G20 summit in France last week.
They are set to compile a report for the European Commission this month.
Berlusconi had promised his fellow eurozone leaders that he would overhaul Italy\'s pensions system and accelerate sales of state assets, but the reforms have stalled to the intense frustration of Germany and others.
The larger-than-life premier is currently a defendant in three trials for bribery, tax fraud, abuse of power and paying for sex with a 17-year-old girl.
Asked what he would do in the future in the La Stampa interview, he said he could \"help out in election campaigns, something I\'ve always been good at.\"
Or he added: \"Maybe I will go back to being president of AC Milan.\"