Berlusconi to resign after parliament adopts reforms

Prime Minister Silvio Berlusconi was set to resign Saturday after dominating Italian political life for 17 years, as lawmakers prepared to give final approval to a package of key economic reforms. Berlusconi has said he will go once the measures he promised to the European Union are adopted in a parliament session starting at 1130 GMT, after market turmoil raised fears that Italy could drag Europe into an unprecedented crisis. A cabinet meeting at which Berlusconi could announce the resignation is scheduled for 1700 GMT, after the vote. The 75-year-old prime minister would then have to formally submit his resignation to Italy's head of state. International Monetary Fund chief Christina Lagarde added her voice to calls from US President Barack Obama, French President Nicolas Sarkozy and others for Italy to then form a new government instead of calling early elections. "I suppose that an appointment will be made within very few days, which again will be a sign of both clarity and political credibility, which is crucial to stabilising the situation," she said during a visit to Japan. Lagarde said Italy, along with Greece, which swore in a new government led by former European Central Bank vice-president Lucas Papademos on Friday, had made "significant progress" in easing uncertainty over its political future. There is little grief among ordinary Italians over the demise of Berlusconi, with latest polls giving him an approval rating of just 22 percent, but he did earn at least one tribute from counterpart and friend Vladimir Putin. The Russian prime minister on Friday saluted Berlusconi as "one of Europe's greatest politicians," referring to him as "one of the last Mohicans. "That he was in power was an undoubted good for Italy," he added. Many in the international community disagree however and will be glad to see the back of the scandal-tainted premier who increasingly became the object of criticism from Italians who said he had turned their country into a joke.   The latest cover of The Economist news weekly, which has had a long-running feud with Berlusconi since declaring him "unfit to lead Italy" in 2001, carried a photo of the media tycoon preening himself with the headline: "That's all, folks." His most likely replacement is former EU commissioner Mario Monti, a 68-year-old economist who built a formidable reputation as a trust-busting bureaucrat in Brussels, but has no experience in political office. Monti could be nominated by Italian President Giorgio Napolitano to form a new government after Berlusconi's resignation. He has already won endorsement from top political and business leaders as well as from the financial markets. Reports of Monti's impending nomination helped ease market jitters in recent days, with one market operator saying the economist was "worth 100 or 150 basis points on the spread" -- the difference between Italian and German bond rates. But the nomination is still far from being a done deal. Large parts of the governing coalition are pressing for early elections, and the outgoing premier himself has said he prefers Angelino Alfano, a 41-year-old former justice minister who leads Berlusconi's People of Freedom party. Italy's top-selling Corriere della Sera daily warned that the centre-right was "playing with fire" by refusing to get behind a new government. "In practice, there is no alternative to taking on collective responsibility," it said. "If Italy wastes more time following the resignation of Berlusconi expected today, it would mean sacrificing ourselves on the altar of financial speculation and in an irreversible way," it added. A final decision on who might try and form a cabinet is up to Napolitano but the president would be forced to dissolve parliament and call early elections if there is no agreement. Analysts fear elections now could deepen political and financial turmoil and possibly cause Italy's debt to explode. The toxic mix of a 1.9 trillion euro ($2.6 trillion) debt, an extremely low growth rate and high borrowing costs has raised concerns that Italy could be cut off from commercial debt markets within months. The IMF and the European Financial Stability Facility have both reportedly offered financial help, but economists warn that the size of Italy's economy may make the country "too big to bail". Berlusconi reluctantly agreed to special EU-IMF monitoring of Italy's accounts at a G20 summit last week, prompting his opponents to carp that Italy is effectively "under external administration."