|Silvio Berlusconi is under huge pressure to quit as PM and make way for a government of national unity [Reuters]
Silvio Berlusconi, the Italian prime minister, has met his ministers and senior financial aides to discuss measures to try and calm the markets.
The turmoil threatens to plunge the eurozone's third largest economy into a full-scale crisis.
The Italian PM, under growing pressure to step down and hand power to an emergency government of national unity, met senior financial aides earlier on Wednesday morning, before the meeting.
There is increasing concern in Europe that Italy's economic problems could soon begin to rival those of Greece.
The meeting focused on the rising cost of Italian government debt, which sits sits at around 120 per cent of its gross domestic product.
The yields on Italian bonds, in affect the rate of interest it has to pay - stands at more than six per cent, which makes it more expensive for Italy to pay its debts, adding to fears about the country's economic stability.
As the market turmoil has increased, threatening a wider euro zone crisis, the scandal plagued Berlusconi has come under fire from all sides over his handling of the crisis.
Giorgio Napolitano, the Italian president, issued a highly unusual statement, calling on Berlusconi to pass reforms
without delay and indicating that he was looking at how much support there was for reform outside the ranks of the
Al Jazeera's Claudio Lavanga, reporting from Rome, said: "The president has become one of Berlusconi's biggest critic, saying he needs to get a move on with the reforms."
Napolitano does not have the power to dismiss Berlusconi as long as he has a parliamentary majority, but if the open
divisions in the coalition were to deepen and provoke a crisis, he would have the power to name a new administration.
Confidence in Berlusconi from Italy's main business and banking federation took a blow as they called on Berlusconi to act immediately or "draw the consequences", underlining the wide distrust of the government from broad sections of society.
The Italian economy has a mix of sluggish growth, a divided and ineffective government and a public debt equivalent to 120 per cent of gross domestic product that poses a growing threat to the survival of the euro.
Berlusconi has promised his European Union partners reforms such as easier rules on redundancies, including for civil servants, and an increase in the pension age but the measures would not be due to take effect for months.
Officials are trying to pack new measures, including cuts to some tax breaks and more labour market liberalisation, into a budget bill currently in the Senate to enable the government to present an approved package of legislation as soon as possible.
A series of austerity packages passed during the summer aimed to bring Italy's budget into balance by 2013 but the government has been widely criticised for the slow and erratic implementation of the measures.
Source: Al Jazeera and agencies