Italian Prime Minister Silvio Berlusconi says that he will resign after parliament passes crucial economic reforms aimed at stabilizing Italy's economy.
Berlusconi made the announcement Tuesday after he lost parliamentary majority during a vote on a routine budget measure in the lower house, with seven ruling party members defecting. The measure passed with 308 votes in favor, but 321 deputies abstained from voting.
After more than half the 630-seat chamber parliament refused to vote, the opposition called for Berlusconi to step down. The beleaguered prime minister acknowledged that the lower house was paralyzed, while noting his coalition still has a majority in the Senate.
Berlusconi is under the pressure by the eurozone leaders to pass a cost-reducing budget and avoid a financial crisis like the one in Greece. Both houses of parliament are expected to vote on his budget reforms this month.
On Wednesday, Italy's 10-year bond yield topped 7 percent.
The prime minister reiterated Wednesday that he will step down as soon as the budget law is passed. Berlusconi also told Italy's La Stampa newspaper that he sees Italy holding elections in early 2012. He will not seek office in the next election.
Berlusconi has picked former justice minister Angelino Alfano as his party's candidate for the prime minister's post.
Italy is the third largest economy in the Eurozone and the seventh largest in the world. But it faces potential economic crisis caused by a ballooning public debt.
Italy's borrowing costs have increased to their highest level since it joined the common euro currency zone and are now close to the 7 percent level that pushed Ireland, Portugal and Greece to seek bailout loans.
The debt crisis sweeping the Eurozone has put pressure on Berlusconi's government to move quickly to enact unpopular austerity reforms to protect the Italian economy.
But Emiliano Alessandri of the German Marshall Fund in the United States says even if Berlusconi left office, Italy's problems would remain.
He says the idea Italy's structural problems will be solved by Berlusconi's political demise alone is "wishful thinking."
Some information for this report was provided by AP, AFP and Reuters.