The vote later looks like it’s on a knife-edge, with Berlusconi’s coalition showing signs of fracture

ROME – Italy’s since the euro was established in 1999 ahead of a budget vote in Parliament that could ratchet up the pressure on Premier Silvio Berlusconi to resign.

The markets have turned their attention this week from the political crisis in Greece — where the two main parties were locked in talks Tuesday to forge a national unity government — to Rome.

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 Berlusconi’s ability to push through austerity and reforms have heightened the unease in financial markets that Italy could need financial aid.

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What happens in Italy is a particular worry as it’s the eurozone’s third-largest economy. With debts of around euro1.9 trillion ($2.6 trillion), Italy’s debts are considered by many in the markets as being too big for Europe to bail out.

Higher rates would make it more difficult for Italy to rollover its debts and will mean they consume more and more of national income. Italy has over euro300 billion ($412 billion) to raise in 2012 alone.

By late-morning, the yield on Italy’s ten-year bonds was up 0.07 percentage point at 6.60 percent, down from an earlier high of 6.74 percent. A rate of over 7 percent is considered unsustainable and proved to be the trigger point that forced Greece, Ireland and Portugal into accepting the need for financial bailouts.

The vote later looks like it’s on a knife-edge, with Berlusconi’s coalition showing signs of fracture. Italian news agency ANSA reported that Finance Minister Giulio Tremonti hurriedly departed from a meeting of eurozone finance ministers in Brussels to return to Rome.

The Chamber of Deputies vote, on a routine measure, is not a confidence vote -whose loss would require Berlusconi to resign. But a loss would certainly send a political message that Berlusconi is in trouble.

In less tense times, the vote would have meant routine approval of the 2010 state accounts, but instead it has become a crucial test of Berlusconi’s survival as head of his 3½ year-old center-right government. Last month, the vote of the same measure failed by one vote. Chamber whips were meeting a few hours before the vote to map out a strategy for the vote, which is likely to take place Tuesday afternoon.

Opposition forces were considering boycotting the vote so the numbers would more clearly show just how many deputies still support the government. If Berlusconi’s forces number less than 316 deputies — or one more than half the number of the 630-member chamber, it would be plain that the media mogul no longer can count on a majority in the lower house of Parliament.

The government could still win the vote, by commanding more than half of those showing up to vote, but a dismal showing could show Berlusconi is too weak politically to continue to govern.

If he gets through Tuesday’s hurdle, Berlusconi has indicated he would put a vote next week on the anti-crisis measures to a confidence vote. If it loses that vote, Berlusconi would have to resign.

Antonio Di Pietro, a leader of a small center-left opposition party, told Sky TG24 TV that Berlusconi’s “political adventure has been over for a while now.” However, he doubted that Berlusconi would resign, even if faring poorly in Tuesday’s vote.

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