ROBERT SIEGEL, HOST:
From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.
GUY RAZ, HOST:
And I'm Guy Raz. Italian Prime Minister Silvio Berlusconi is bowing to pressure at home and abroad and has pledged to step down. That's after watching his parliamentary majority evaporate today. As NPR's Sylvia Poggioli reports now, Berlusconi says he won't hand in his resignation until parliament approves a bill of austerity measures that he pledged to Italy's EU partners.
GIANFRANCO FINI: (Foreign Language Spoken).
SYLVIA POGGIOLI, BYLINE: The speaker of the lower house of parliament, Gianfranco Fini, announced the results of a routine budget bill, 308 votes in favor, fewer than the 321 lawmakers who abstained. It passed, but it was eight votes short of a majority in the 630-member chamber.
Sitting in the government benches, the prime minister visibly blanched and huddled with his closest aides, scrutinizing the vote tally, apparently trying to identify which of his supporters had turned against him.
Minutes later, the leader of the major opposition party, Pier Luigi Bersani, took the floor.
PIER LUIGI BERSANI: (Through Translator) This vote has shown that the government no longer has a majority and we all know over and over again that we have a government with a credibility deficit. If you have a crumb of sense left in front of Italy, hand in your resignation.
POGGIOLI: Shortly later, Berlusconi went to the Quirinal Palace to meet President Giorgio Napolitano. An hour later, he announced he'll step down once parliament approves the latest package of austerity measures demanded by the EU.
As soon as the news circulated, markets rallied. Investors throughout the world had closely followed the parliamentary vote. This morning, markets signaled lack of confidence that the Berlusconi government could reduce Italy's $2.6 trillion debt.
The yield on 10 year bonds today reached 6.74 percent, very close to the seven percent threshold that forced Greece, Ireland and Portugal to seek international bailouts. And the atmosphere worsened when the EU Economic Commissioner, Olli Rehn, voiced skepticism that the austerity measures promised by Berlusconi can balance the books by 2013.
OLLI REHN: I sent a questionnaire of around 40 very specific questions to Finance Minister Giulio Tremonti.
POGGIOLI: Rehn's questions focus on promised measures, such as raising the retirement age, privatization of state-owned assets and new taxes. The commissioner indicated that further budget cutting is necessary.
It's no secret that Italy's EU partners were rooting for an early Berlusconi resignation. The Italian prime minister plagued by corruption trials and sex scandals has lost international credibility. But it's still not clear when parliament will vote on the austerity bill, perhaps not until next week.
Several analysts believe that Berlusconi is trying to gain time in order to impose early elections so that he can remain caretaker for another few weeks or months, but opposition parties have joined forces to try to form a national unity government headed by a technocrat. The likely candidate is Mario Monti, a respected former EU commissioner who would be given the task of pushing through unpopular reforms.
Sylvia Poggioli, NPR News, Rome. Transcript provided by NPR, Copyright NPR.