Berlusconi vows to fight threats to Italy

Italian prime minister Silvio Berlusconi has pledged to step up economic reforms as he vowed to fight the market turmoil threatening to drag Italy into a Greek-style financial crisis.

He spoke in parliament to dispel mounting concerns in financial markets over the country's high debt burden and anaemic growth trajectory.

Market fears have centred since early July on splits in Berlusconi's centre-right government and on discord between Berlusconi and economy minister Giulio Tremonti, seen as an anchor of stability.

In his speech, Berlusconi said Italy was "economically and financially solid" and "knows how to stay together and confront difficulties" in difficult times.

"The government and parliament will act, I hope, with a large political and social consensus to fight every threat to our financial stability. Today more than ever, we need to act all together," said Berlusconi.

But analysts said the speech offered little detail on how the government would tackle the threat of debt contagion from peripheral eurozone states.

"I didn't have very high expectations but even so the content was quite disappointing," said Chiara Corsa, an economist with Unicredit in Milan. "He showed no willingness to bring forward any of the austerity measures to next year, which we had hoped for and markets would have appreciated.

Italy is the eurozone's third-largest economy and alarm has spread at the prospect of a crisis in its debt funding that would overwhelm bailout measures created to help troubled smaller countries like Greece.

Berlusconi's speech follows weeks of growing turbulence on financial markets which has sent yields on Italian and Spanish 10-year bonds to new 14-year highs and hit bank stocks hard.

A €48bn (£41.9bn) austerity package, passed in record time last month and intended to keep the government on track to bring the budget into balance by 2014 and control Italy's huge public debt, has failed to calm market fears.

Berlusconi, weakened by scandals and largely silent over the past weeks, delayed his address to the lower house until after the close of the Milan bourse but made few specific proposals on either reform or deficit cuts.