Italian stocks were volatile on Wednesday as the government prepared structural reforms under pressure from the European Central Bank, which has propped up the bond market with massive purchases this week. The FTSE Mib index in Milan shot up 2.6 percent at the open but then quickly dropped into negative territory and was down 0.22 percent at around 0930 GMT. There were sharp drops for Italy\'s hard-hit banks, with Ubi Banca down 2.89 percent, UniCredit losing 2.53 percent and Intesa Sanpaolo falling 2.44 percent. Italy also on Wednesday raised 6.5 billion euros ($9.3 billion) in a 12-month bond auction on Wednesday, paying an average return of 2.959 percent, far lower than the 3.67 percent paid in the last similar operation last month. Investors were keeping a close eye on a crucial government meeting with trade unions and big business later on Wednesday to discuss a series of reforms. \"Used to floating over problems and promising reforms that never come, (Prime Minister Silvio) Berlusconi\'s centre-right government has suddenly hit a wall,\" Stefano Folli, a political columnist, wrote in Il Sole 24 Ore. \"Either it climbs that wall by implementing drastic and in some ways dramatic measures indicated by the ECB or it loses all legitimacy,\" he said. The proposals being considered would see savings of up to 35 billion euros in 2012, business daily Il Sole 24 Ore reported, listing an earlier than expected increase in the minimum pension age as being among the proposals on the table. The government is also mulling accelerated cuts in social welfare payments, a new tax on second homes and a possible one-off tax on deposits and savings, although Berlusconi is firmly opposed to the latter, La Repubblica daily said. There are also proposals to cut perks and salaries for politicians, which are among the highest in Europe, amid rising public anger over austerity measures. Another change could see a cut in the number of provincial administrations. Some of the measures are expected to be adopted at an emergency cabinet meeting expected to be held some time next week, the reports said. Lawmakers called back from summer recess are also set to meet on Thursday to discuss introducing a constitutional amendment to enforce balanced budgets. Berlusconi on Friday said Italy would speed up planned austerity measures to bring the budget back into balance by 2013 instead of 2014 -- but some analysts have cast doubt on the government\'s ability to implement cuts and reforms. ECB intervention on the bond markets this week has driven down borrowing rates, which had shot up in recent weeks amid nervousness that Italy could be dragged into a debt spiral along with bailed-out Greece, Ireland and Portugal. In return, Italian media reported that the ECB has demanded that the government proceed with the privatisation of municipal services and overhaul labour laws to allow easier firing of employees on permanent contracts. The ECB also asked for liberalisation reforms to be passed by decree instead of waiting for lengthier approval through parliament, one report said. In an editorial published on Wednesday entitled \"Silvio\'s last chance to cut the deficit,\" the Financial Times said: \"What Italy is suffering from is not a supersized budget deficit but a supersized deficit of political leadership. \"Mr. Berlusconi\'s track record on economic reform is abysmal,\" it said. \"It is more than 17 years since he was elected to power for the first time. In three spells as premier he has repeatedly promised to liberate Italy\'s dynamic entrepreneurial energies -- and delivered next to nothing.\"