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Italy protesters rally against Berlusconi

By Laura Smith-Spark, CNN
updated 1:51 PM EDT, Sat November 5, 2011
STORY HIGHLIGHTS
  • Tens of thousands of protesters are rallying in central Rome Saturday
  • Berlusconi is under pressure from opposition parties to step aside
  • Italy must implement reforms or suffer a "credibility gap," its president says
  • Italy, which has large debts, has the third-largest economy in the euro zone

(CNN) -- Tens of thousands of demonstrators have gathered in Rome Saturday to voice their opposition to the government of Italian Prime Minister Silvio Berlusconi and its reforms.

Many of the protesters, waving opposition party flags as they filled a central square in a peaceful rally, called for Berlusconi to step aside.

Some say they want immediate elections, others the formation of a technocratic transitional government to guide Italy through the difficult months to come.

Berlusconi said Friday at the G-20 economic summit that Italy had agreed to let the International Monetary Fund "certify" its reform program, a step designed to boost investor confidence.

But he faces a vote of confidence perhaps as soon as next week, amid criticism of his handling of Italy's economy -- and analysts say he may no longer have the support of a majority in parliament.

A crucial vote on budget reform measures is expected in Rome Tuesday.

Italy's President Giorgio Napolitano has warned of a "grave crisis of credibility" regarding Italy's commitment to reform and said structural reforms agreed to in Brussels last month must be implemented.

International concern has focused on Italy -- the third-largest economy in the euro zone -- in recent weeks, amid concern that the financial crisis centered on Greece might spread. The ripple effects of a meltdown in Italy would be far more serious for the global economy than a collapse in Athens.

Although Italy's economy is in much better shape than that of Greece, borrowing costs for the Italian government rose to a euro-area high of 6.43% Friday, adding to the pressure. The nation has debts equal to about 150% of its economic output.

There are growing fears, meanwhile, that Berlusconi's government no longer has the strength to push through the austerity measures needed to get the economy back on track.

These include such steps as tax increases and raising the retirement age by two years to 67.

Berlusconi, who has survived many confidence votes in the past, has said now is not the time to change the country's leadership.

But the president's recent remarks suggest he, alongside those calling for Berlusconi to step down, is not convinced by the job the prime minister is doing.

"Italy cannot give signs of insufficient determination and reliability," Napolitano said in an address at an Italian university Friday.

"Let's be honest: towards our country there has arisen in Europe, and not only in Europe, a grave crisis of credibility. We must be aware and feel, more than hurt, spurred in our pride and in our will to recuperate."

He said a "collective soul searching" was needed among the country's politicians and citizens, as they look for a way out of the current crisis.

A date has not yet been set for the confidence vote called by Berlusconi. Under a motion of confidence, lawmakers signal to the head of state whether the government has the support of parliament.

A loss typically results in the government's dissolution and the holding of a general election unless the head of state asks someone with more support to form a government.

Although Italy passed a package of austerity measures in September, including tax increases, some economists fear that without further reforms its debts could become overwhelming -- and there would not be enough money in the European rescue fund to bail it out.

Italy has one of the largest bond markets in the world, worth an estimated 2 trillion euros (about US $2.8 trillion).

Experts say the recent lofty interest levels are particularly concerning because the ECB has been buying Italian bonds since the start of August. The move initially pushed yields below 5% but that was short lived.

CNN's Matthew Chance and Hada Messia in Rome contributed to this report.

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