Italian Premier Silvio Berlusconi averted a government collapse and reached a deal with allies on emergency growth measures in time for an EU summit on saving the euro before political tensions erupted in a fist fight in parliament.
Berlusconi and Northern League leader Umberto Bossi reached a compromise on raising Italy's retirement age in late-night parliament talks Tuesday _ a point of disagreement that had threatened Berlusconi's leadership. His majority in parliament needs the support of the Northern League.
A fist fight in the Chamber of Deputies on Wednesday when League lawmakers briefly came to blows with colleagues loyal to a former Berlusconi ally Gianfranco Fini, the Chamber president who broke with the governing coalition early in its term. Scuffles are not rare in Italy's parliament.
League deputies were incensed when Fini, on a TV talk show, mentioned that Bossi's wife, took early retirement from a teaching job when she was 39.
Berlusconi will deliver a letter detailing the emergency measures to an EU summit. A spokesman said the contents are reserved for summit leaders, but Italian media reported the measures include new infrastructure spending, with a push for more private investment for strategic projects, the privatization of public entities and property and simplifying rules for companies.
Changes to Italy's pension scheme had become a major sticking point, with Bossi's party refusing to risk alienating its constituency of workers from the productive north.
Under the overnight deal, Italy will gradually raise the pension age for all workers to 67 by 2025, bringing it in line with European trends. Currently, Italian men retire at 65 along with women in the public sector but some women in the private sector retire earlier.
The 15-page letter also reportedly contains details of the euro54 billion ($75 billion) in austerity measures passed by lawmakers last month to balance Italy's budget by 2013.
The European Union had asked for measures, with a clear calendar for implementation, to promote growth, raise the pension age and simplify civil legal proceedings to encourage foreign investment
Outgoing Bank of Italy governor Mario Draghi called the letter of intent "an important step ... but now it's time to implement the measures swiftly and concretely." Draghi, who takes over helm of the European Central Bank on Nov. 1, also urged Berlusconi's government to quickly activate the spending cuts and new taxes approved last month.
In Brussels, a spokesman for the European commission, Olivier Bailly, said the EU was "confident" it would have the letter by the end of the day.
Italy is seen as the next country at risk in the widening sovereign debt crisis, but with euro1.9 trillion ($2.6 trillion) in public debt, an Italian default would be disastrous for the global economy. The European Central Bank for months has been buying billions in Italian bonds to help keep borrowing costs down.
Nonetheless, Italy saw borrowing costs on short-term bonds spike Wednesday. The Italian Treasury sold euro8.5 billion ($11.83 billion) in six-month bonds at 3.53 percent, up sharply from last month's 3.071 percent, its highest level in three years. Yields on two-year bonds rose to 4.628 percent from 4.511.
A Berlusconi spokesman, meanwhile, brushed off reports that Berlusconi was preparing to resign. The left-leaning La Repubblica newspaper, one of Berlusconi's staunchest critics, reported that he had threatened to resign if no deal could be reached with the Northern League, which was persisting in its resistance to raising the retirement age.