Silvio Berlusconi, Italy’s embattled prime minister, signalled that he would resign after parliament passes an upcoming financial stability law that will implement fresh austerity measure demanded by the European Union. The news came after Mr Berlusconi lost his absolute majority in parliament and came under intense pressure from his allies and the markets.

Mr Berlusconi met last night with Giorgio Napolitano, head of state, after conferring with party leaders in the wake of his parliamentary setback. Ansa news agency had reported earlier that the 75-year-old prime minister would make one last effort to save his centre-right coalition government in a vote of confidence.

The government survived a motion ratifying the 2010 accounts in the lower house, but lost as many as eight deputies from Mr Berlusconi’s People of Liberty party who joined opposition parties in abstaining from the vote. This reduced the government’s votes to 308 – eight short of an absolute majority.