After days of market turmoil, the Italian Parliament is rushing approval of an emergency budget to try to reassure international investors that Italy — the world's seventh-largest economy — will not be overwhelmed by the sovereign debt crisis.
The threat to Italy is putting pressure on European leaders to find a comprehensive solution to the crisis sweeping the single European currency.
The $99 billion austerity package swept through the Senate on Thursday at record speed and goes to the Lower House today.
Finance Minister Giulio Tremonti, seen abroad as a guarantor of Italy's financial stability, described a series of tax hikes and spending cuts to balance the budget by 2014.
He acknowledged Italy's massive debt burden — 120 percent of GDP — but also pointed out that market turmoil has put the spotlight on the dilemma facing Europe.
"No one should have any illusions of individual salvation," he said. "Just like on the Titanic, not even the first-class passengers will be saved."
The crisis came by surprise. Italy had no housing bubble, its banks are considered solid, and half the debt is in Italian hands. Its major problem is a decade of no growth.
Political analysts agree what triggered the market attack was Prime Minister Silvio Berlusconi's criticism of Tremonti's tightfisted policies. Berlusconi did not appear in Parliament Thursday, a signal perhaps that he doesn't want to be linked to such unpopular austerity measures.
Acknowledging the threat to Italy, the opposition is enabling the austerity measures' speedy approval. Anna Finocchiaro, a leader of the opposition Democratic Party, said Berlusconi should get the message.
"Now, you should at least have the dignity and sense of responsibility," she said, "to hand in your resignation."
With one of the core European economies teetering on the edge of the eurozone crisis, the European Union was shaken. Up to now, it has dealt with bailouts for smaller economies on the periphery: Greece, Ireland and Portugal.
Daniel Gros, director of the Centre for European Policy Studies in Brussels, said Italy is too big to fail.
"Italy is the final domino," he said, "which would basically destroy the entire EMU [European Monetary Union], the euro area, if Italy were to fall."
But despite growing anxiety, European leaders seem unable to overcome divisions and forge a comprehensive solution to save their currency.