A nationwide strike against austerity measures brought Italy to a near-halt on Tuesday, piling pressure on Silvio Berlusconi's government as it tries to convince nervous markets that it can produce and enforce a credible deficit-cutting plan.
Late Tuesday, the government got a sorely needed boost when Italy's main industrial lobby Confindustria voiced support for the latest version of the flip-flopping austerity plan, which among other things would increase the IVA sales tax to 21 percent from 20 percent.
Previously, Confindustria had publicly criticized the plan as failing to do anything to spur economic growth.
The government, meanwhile, said it would tie passage of the euro45.5 billion ($68 billion) tax and cut austerity plan to a vote of confidence, as Berlusconi seeks to enforce discipline in his often unruly coalition. The government said the "grave international context of the financial crisis" made the decision necessary.
If the government fails the confidence vote, it would fall; such a threat is designed to compel lawmakers to pass the plan, which has changed almost daily as Berlusconi seeks to placate his allies.
The strike by Italy's largest union disrupted air, land and sea transport, stalled manufacturing and curtailed government services.
Susanna Camusso, head of the left-leaning CGIL union, said the current austerity proposal needs to be thrown out and substituted with fairer measures. Unions claim it fails to create jobs while putting too much burden on workers.
"We are striking against measures that are unjust. We are striking against measures that are irresponsible, and which put all of the burden on public sector workers," Camusso told demonstrators in Rome.
Camusso pledged to bring lawsuits and court cases against the current draft plan of austerity measures, which among other things want to make it easier to fire workers.
The European Commission, meanwhile, welcomed the new measures.
"They confirm the determination of the Italian authorities to meet the agreed targets of deficit and debt reduction, while contributing to tackle the deep rooted structural weaknesses of the Italian economy," it said in a statement.
The Commission called for swift adoption of the adjustment package in a spirit of national cohesion and solidarity.
It's a delicate moment for Berlusconi's government, which is under intense international pressure to pass measures this month aimed at balancing the budget by 2013. Worries that it is backtracking on some of its pledges have seen investors push up the country's borrowing rates.
The Senate takes up the measures on Tuesday, with details still the subject of fierce political fighting.
The upper house is set to vote by the end of the week. The package then moves to the lower house in Parliament, with adoption expected by Sept. 15.
Italy's president on Monday urged political leaders to come up with "more efficient measures" citing "alarming signs" that the financial crisis is worsening.
Workers for the state railway, city transit systems and ferry services all were on strike for periods throughout the day, creating difficulties for travelers. Hospital workers, postal employees and bank tellers also joined in, although adherence varied greatly. And workers for such industrial concerns as Fiat also participated.
But two other unions refused to join the strike call, saying it sent the wrong message to investors.
Court proceedings at the appeals trial in Perugia of U.S. student Amanda Knox, who has been convicted of murder, were delayed by about an hour as members of the jury arrived late due to the strike.
Investors have been unsettled by the bickering among Berlusconi's allies on the best measures to balance the budget.
Italian borrowing costs soared this week, despite an ongoing program by the European Central Bank to buy up Italian and Spanish government bonds and keep their interest rates low.
Italy's central bank chief Mario Draghi warned on Monday that Italy should not take for granted the ECB's support. Draghi is set to replace Jean Claude Trichet as head of the ECB on Nov. 1.
"The program is temporary," Draghi said at a Paris conference. "It cannot be used to circumvent the fundamental principle of budgetary discipline...in other words it should not be taken for granted by member states. "
Gabriele Steinhauser in Brussels contributed to this story.