- Associated Press - Tuesday, November 8, 2011

ROME — Prime Minister Silvio Berlusconi said Tuesday that his decision to resign after parliament passes economic reforms is for the good of the country and to settle financial markets that have lost confidence in Italy’s ability to rein in debt and spur growth.

Mr. Berlusconi said he would prefer to call early elections, but that the decision rests with Italian President Giorgio Napolitano.

In comments that marked a dramatic shift from his normally defiant tone, Mr. Berlusconi conceded he had lost his parliamentary majority during a routine vote Tuesday and that “things like who leads or who doesn’t lead the government” is less important than doing “what is right for the country.”

Mr. Berlusconi’s government is under intense pressure to enact quick reforms to shore up Italy’s defenses against Europe’s raging debt crisis.

However, a weak coalition and doubts over Mr. Berlusconi’s leadership have ignited market fears of a looming Italian financial disaster that could bring down the 17-nation eurozone and shock the global economy.

Italy’s borrowing rates spiked Tuesday to their highest level since the euro was established in 1999.

The yield on Italy’s 10-year bonds was up 0.24 percentage points at 6.77 percent. A rate of more than 7 percent is considered unsustainable and proved to be the trigger point that forced Greece, Portugal and Ireland into accepting financial bailouts.

The president’s office said that once Mr. Berlusconi resigns, Mr. Napolitano would begin political consultations to form a new government.

The most widely discussed name to lead a technical government is Mario Monti, the former EU competition commissioner. The statement made no mention of the possibility of early elections.

The developments capped a convulsive day in the markets and in Italy’s political circles after parliament approved the 2010 state accounts, but dealt Mr. Berlusconi a withering blow by revealing that he no longer commands enough support to govern.

Up until Tuesday night, he had refused to heed calls from all sides to step down, but the tally made clear he had little choice.

Tuesday’s vote garnered 308 votes of approval and none against in the Chamber of Deputies. But 321 deputies abstained from voting - most from the opposition center-left - a tactic that laid bare Mr. Berlusconi’s shrinking hold.

Mr. Berlusconi’s margin was eight shy of the 316 votes he needs to claim an overall majority in the 630-member chamber.

“This government does not have the majority!” thundered opposition leader Pierluigi Bersani after the vote. “If you have a crumb of sense in front of Italy, give your resignation.”

As Mr. Bersani spoke, Mr. Berlusconi scribbled his options on a piece of paper. An AP photo showed he wrote “resignation” and also “eight traitors,” an apparent reference to former allies who had abstained.

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