Economic, political crisis deepens in Italy

Rome (CNN) -- The eurozone debt crisis deepened Wednesday as the yield on Italian bonds rose above 7%, the level at which countries are at risk of being unable to fund themselves and more likely to seek international bailouts.

The pricing -- set by traders who are selling Italy's bonds -- hit 7.3% by mid morning after breaking through 7% a short while earlier. "It's like tectonic plates," one desk analyst told CNN. "You have this pressure and then it breaks."

On Tuesday, the bond yield spiked to 6.77% after the country's Prime Minister Silvio Berlusconi won a parliamentary vote approving a new budget that includes austerity measures sought by international lenders, but lost his majority in parliament.

Berlusconi later said he would resign, and on Wednesday his spokesman Paolo Bonaiuti said he would not run in the country's next parliamentary elections.

International concern has focused on Italy, the third-largest economy in the eurozone, in the past few weeks as analysts worry that the financial crisis centered on Greece might spread.

Although Italy is solvent, it holds a huge debt pile, and investors fear it may not be able to sustain that level of borrowing. As it is the world's eighth-largest economy, a meltdown would send shock waves through the global economy.

Though the precise timing of Berlusconi's departure from power was unclear, news of his imminent departure signaled the end of an era in Italian politics.

The 75-year-old business tycoon has been a dominant force since forming his Forza Italia party in 1994.

He has weathered many crises, including sex scandals and corruption trials, in his three terms in office. But the loss of his parliamentary majority -- and with it his ability to command the government -- was a blow from which Berlusconi could not recover.

He had come under enormous pressure to resign in recent days, with what should have been a routine vote on the 2010 budget seen as a test of whether he still had the confidence of the government.

Berlusconi told Italian newspaper La Stampa that his decision gives him freedom.

"I will not put myself for elections," he told the newspaper. "Actually I feel liberated. Now it is time for Alfano. He will be our premier candidate. He is extremely good, much better than one can expect and his leadership has been accepted by all."

Berlusconi was referring to former Justice Minister Angelino Alfano, who has been known as Berlusconi's hand-picked successor.

But there will be others vying for Berlusconi's position after he leaves.

Berlusconi's announcements this week follow the passage of a key budget vote in the lower house that fell eight votes short of a parliamentary majority.

It was not clear when the Senate will vote on the economic measures.

By the CNN Wire Staff