Italy's debt problem emerged as the euro zone's biggest challenge at an EU summit last Sunday (see background).
In particular, the European Commission insisted that Italy should stick to its commitments to cut spending, reform the pension system and overhaul its weak judiciary.
Men in the private sector and civil servants of both genders can currently retire at age 65, while women in the private sector can retire at age 60. The EU insists that the retirement age should be raised at 67.
An emergency cabinet meeting on pension reform late on Monday ended without agreement, as the Northern League, Berlusconi's key coalition partner, refused to raise the pension age. Late yesterday it was reported that a deal had been reached, but details on the pension deal were unclear.
Bossi, leader of the Northern League, said it was up to the EU to decide if the reforms are enough. He added that his party still opposed raising some retirement ages.
Asked if he was still gloomy about the chances of the government surviving disputes over economic reforms demanded by the EU, Bossi replied: "I remain pessimistic."
In the meantime, Berlusconi received unexpected support from the country's leftist President Giorgio Napolitano, who alluded to the ironic remarks by French President Nicolas Sarkozy over Sunday's summit, saying that expressions of mistrust at Italy's engagement were "inappropriate and unpleasant."
Peer pressure
The European Commission tried to minimise the affront suffered by Berlusconi over the summit. Commission spokesperson Amadeu Altafaj said this was in fact "peer pressure," and that "27 democratically elected governments" had agreed to "increase surveillance" using this instrument.
"We have to get used to it," Altafaj said.
Altafaj said today (26 October) that what the Commission was looking for was not only pension reform, but rigorous implementation of growth-enhancing structural reforms that have not yet been adopted.
Altafaj also singled out the issue of judicial reform.
"We are talking about reforms to ensure that businesses can count on, for instance, legal certainty when it comes to the upholding of contracts and timely court rulings," he said.
"Our understanding is that Italy will communicate to President Barroso and President Van Rompuy its specific intentions before today's European Council," Altafaj said.
Asked if the collapse of Berlusconi's government would make Italy's situation better or worse, Professor James Walston, quoted by Euronews, said the Italian leader's departure was probably the best alternative.
“The European Union made it very clear on Sunday and Monday that they wanted action immediately and they [Italy] will have to do that on Wednesday. If Berlusconi goes, there will not be immediate action but there will be the possibility of immediate action, because he has not done anything, he has not done enough over the last four months,” said Walston, a political scientist at the American University of Rome.
