EU summit gives Berlusconi breathing space

(ROME) - Silvio Berlusconi may have temporarily shaken off European pressure to tackle Italy's economy by proposing fresh reforms but the fragility of his coalition throws doubt on whether they will be implemented.

His European allies "appreciated Italy's position, timetable and measures, and judged them to be effective," the premier said after delivering his highly-anticipated letter of intent to eurozone leaders at a Brussels summit.

He also insisted that his government would serve out its mandate to 2013.

Unsourced reports in Italian media on Wednesday said Berlusconi had secretly promised his Northern League coalition partner that he would call early elections in March in exchange for support on highly disputed reforms.

Despite talk that the bickering government was on a knife-edge and could collapse, the League's head Umberto Bossi ruled out calling elections now, saying it would go to the vote "when it is time to do so."

Italy has promised Brussels it will present details of ambitious new measures to put the economy back on track by November 15.

In the measures, the retirement age will be raised to 67 beginning in 2026, state assets will be sold off and it will become easier to fire employees -- to the great fury of Italy's trade unions.

Italy's biggest union CGIL described the employment reforms as "nightmarish" and promised "strong reactions," while the Catholic CISL and moderate UIL unions threatened to strike.

The new measures "are so ambitious that it could be thought they'll stay just words on paper and be used to buy time," the Corriere della Sera daily wrote.

"But it should not be taken for granted that Berlusconi's majority will last much longer. It seems no one is able to control the situation: not even the centre-right," it said.

The government is riddled with internal disagreements over a number of subjects, particularly the economy, and has recently been struggling to scrape together a majority in parliament.

With the premier's popularity at an all time low, ministers unsure as to where their allegiance lies and a damaging split within the Northern League, there is no guarantee that the government could win an early election.

"We would love to hold on until 2013," a Northern League member told La Stampa newspaper on condition of anonymity.

"It's clear that it's very difficult to go on like this. But give one good reason why Berlusconi should want to go to the ballots and risk losing?" he said.

There is a 50-percent chance elections will be called in 2012 according to the newspaper, which spoke of "panic" among those who fear losing their seats -- including 350 members of parliament who need to have worked for five years in the job before they can claim their pension.

"A number of observers believe that, if the government doesn't fall before the end of the year, there will not be enough time to organise early elections" in spring 2012, political science professor Marco Tarchi told AFP.

As Italy never holds elections in June or during the autumn, elections will either be held in spring 2012 or in spring 2013.

Should Berlusconi be able to hold on, he would finish his second five-year term in power -- no mean feat in an Italy used to short-lived governments and leaders.

For once, the markets seemed to react well to the premier's handling of the crisis, soaring over 5.0 percent in afternoon trading after news of the fresh reforms and the wider eurozone debt crisis deal.