By James Mackenzie
ROME (Reuters) - Workers across Italy began a strike on Tuesday as the center-right government of Prime Minister Silvio Berlusconi scrambled to secure parliamentary backing for a package of austerity measures.
The eight-hour strike called by the CGIL, Italy's largest union, is expected to disrupt public transport including air traffic, underlining a sense of emergency in the euro zone's third largest economy.
The strike, called to protest the 45.5 billion euro ($64 billion) austerity measures, coincides with the opening of a debate in the Senate which the government hopes will see swift approval before the package moves to the lower house.
In an unusual statement that highlighted the gravity of the situation after a sell off of Italian bonds on Monday, President Giorgio Napolitano said urgent action was needed to restore trust in public finances.
"It is a sign of the persistent difficulty in regaining trust as is urgently and indispensably required," he said, adding that he urged all parties not to block measures needed to restore credibility.
He said there was time to insert measures "capable of reinforcing the efficiency and credibility" of the austerity package passed in parliament last month. It is currently undergoing revision.
Business daily Il Sole 24 Ore said an increase in VAT, a measure so far resisted by Economy Minister Giulio Tremonti, may be included in the package as well as a possible delay to retirement ages.
Tuesday's debate in the Senate is due to start at 4.30 p.m. (10:30 a.m. ET) with upper house approval possible as early as Wednesday after the center-left opposition Democratic Party said late on Monday it was willing to allow a swift vote.
The package would then move to the lower house before final approval, originally expected by September 20.
The European Central Bank has been shielding Rome from the full force of the market by purchasing Italian bonds to try to hold down yields and stop borrowing costs from reaching unsustainable levels.
But its patience has been stretched by the chaotic manner in which the austerity package has been handled and by the absence of concrete steps to meet the government's pledge of balancing the budget by 2013.
On Monday, Mario Draghi, who takes over as head of the ECB in November, stepped up calls for Italy to act, delivering a pointed warning that the central bank's willingness to continue buying bonds "should not be taken for granted."
In a clear sign of rising market worries, yields on Italian 10-year bonds climbed to nearly 5.6 percent on Monday, approaching the levels of more than 6 percent seen before the ECB began buying bonds last month.
The premium investors demand to buy Italian bonds rather than benchmark German debt widened to 369 basis points, more than 30 points higher than the equivalent Spanish spread as Italy has moved firmly to the center of the euro zone crisis.
"Italy is today the weak point of the euro. Its weakness risks irreparably the whole European construction, multiplying the damage for us as well," Turin daily La Stampa said in a front-page editorial.
Italy's European partners have been watching with alarm as government wrangling has overshadowed the package. German Chancellor Angela Merkel told members of her party on Monday that the situation in Italy was "extremely fragile."
Italy has wrestled with sluggish growth and one of the world's highest levels of public debt for years but a modest deficit, high private savings and a conservative banking system had kept it largely on the margins of the crisis until July.
Berlusconi's government, which until recently boasted repeatedly of keeping Italy out of the crisis, has struggled to build a defense against the market pressure, hampered by deep divisions in its own ranks over tax and pension issues.
Measures ranging from a tax on high earners, retirement delays for some university graduates, cuts to local government funding or the abolition of small town councils have been proposed and then dropped with bewildering speed.
In their place, Tremonti is putting his faith in stepped up measures to combat tax evasion despite a long history of failure by successive Italian governments.
Berlusconi and Tremonti have appeared increasingly at odds over the package, heightening speculation of a possible political crisis which could bring down the government.
Further complicating the picture, Berlusconi has also been hit by a new legal case, following the arrest of a businessman last week on charges of attempted extortion of the premier in connection with a two-year-old prostitution scandal.