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Italian Cabinet discusses growth measures demanded by EU leaders, eyes labor market reforms
MILAN (AP) ' Premier Silvio Berlusconi summoned his Cabinet for an emergency meeting Monday to discuss growth measures the European Union has demanded so that Italy does not get further dragged into Europe's growing debt crisis.
Italy received stern warnings over the weekend from France and Germany, as the EU pressed the eurozone's third-largest economy to present measures by Wednesday on how it plans to revive weak growth. The 17-nation eurozone has already been forced to bail out three of its weakest members ' Greece, Ireland and Portugal ' but could not handle a possible bailout of a nation the size of Italy.
The package should include measures to reform Italy's labor markets and its inefficient judicial system, considered a main impediment to foreign investment.
"There are high expectations. It is now up to the Italian authorities to meet them," EU commission spokesman Amadeu Altafaj Tardio said in Brussels.
Italy has passed euro54 billion ($75 billion) in austerity measures aimed at balancing the budget by 2013, but implementation has been slow and the government has faltered on promised growth measures.
The latest Italian reform package also was expected to contain measures aimed at raising the retirement age to match that Germany, which is raising the retirement to 67 for anyone born after 1964. However, any change in Italy's retirement age will face fierce resistance from Berlusconi's main political ally, the Northern League, whose constituency includes workers in Italy's productive north. Unions also oppose raising the pension age.
"Italy doesn't want to damage the rights of retirees," said Foreign Minister Franco Frattini, a close ally of Berlusconi's. "We want to give people now in their 40s the possibility of having a pension in 20 years."
Still he admitted the system must be reformed, saying "if it doesn't change, the pension system will be unsustainable."
A weekend EU summit failed to make tough decisions to tackle Europe's growing debt crisis but leaders pledged to lay out a concrete measures on Wednesday. They are likely to include actions to recapitalize Europe's banks, which are expected to have to take steep losses on Greek debt, as well as boosting the eurozone bailout fund.
Italy is feared to be the next nation that could succumb to the crisis and bailing its euro1.9 trillion ($2.63 trillion) debt ' nearly 120 percent of its GDP ' would overwhelm the euro zone and threaten the entire global economy.
Berlusconi skipped a court hearing in his Milan corruption trial on Monday to work on the measures, after Italy got some unwanted attention from Germany and France, Europe's largest economies.
"We made it very clear that Italy is a big and important partner for the euro area and that everything needs to be done to live up to this responsibility," German Chancellor Angela Merkel told reporters after meeting with Berlusconi.
"Trust does not just come from a firewall," she added. "Italy has great economic power but Italy also has a very high overall debt level. And that was to be taken down in the coming years in a credible way."
Still, Berlusconi insisted afterward: "The Italian fundamentals are very solid."
Italy's borrowing costs to service its enormous debt have been rising over the past months as the government falters on economic reform. Bank of Italy governor Mario Draghi has warned that without quick action, the growing yields will eat up a significant portion of the austerity measures that Italy adopted in September under pressure from the European Central Bank, which Draghi will head from Nov. 1.
For weeks, the ECB has been buying up billions in Italian bonds, trying to keep Italy's borrowing costs down.
Don Melvin reported from Brussels.