LONDON — Seeking to calm fears of an escalating debt crisis in Europe, Italy's embattled Prime Minister Silvio Berlusconi unveiled a plan for widespread economic reform Friday that would speed up painful austerity measures and move the world's seventh-largest economy toward adoption of a balanced-budget amendment.
The sweeping plan, which came just 48 hours after Berlusconi had dismissed the need to do more, came as pressure intensified on European leaders to stem the slide of massively indebted Italy into the same kind of fiscal crises that have swept over the smaller economies of Greece, Ireland and Portugal. Berlusconi's announcement appeared to pave the way for the European Central Bank to engage in a buying spree of Italian bonds in an attempt to bring its borrowing costs down from unsustainably high levels.
It remained unclear whether the package would be enough to ease the panic over Europe's debt crisis that, along with fears of a slowdown in the United States, erased $2.5 trillion off global stock markets this week.
It brought into focus the stark options ahead for a group of 17 European nations that for years have sought to share one currency without making the politically hard decisions that would make German and Italian taxpayers, for instance, just as liable for the region's collective debt as the residents of, say, Virginia and California are to U.S. debt.
"This is about the future of Europe now," said Peter Bofinger, an influential German economist. "If Italy blows apart, the (euro zone) blows apart. This isn't like Portugal or Ireland or Greece. The consequences for Europe are now great. They have to, they must, act."