Italy approves austerity, Berlusconi resigns

ROME (CNN) -- The Italian lower house of parliament on Saturday approved a series of austerity measures demanded by Europe to shore up confidence in the country's economy. It passed by a vote of 380 for to 26 against.

The package, which includes spending cuts and proposals to boost growth, was approved by the Senate Friday, resulting in a market surge.

Just hours after the vote, Italian Prime Minister Silvio Berlusconi officially resigned, according to the presidential palace press office, seemingly bringing an end to a long career played out on center-stage in the country's volatile political arena.

The approved measures include pension reform, with plans to raise the retirement age from 65 to 67, the privatization of state-owned companies and sale of state-owned properties, the liberalization of certain professions, and investment in infrastructure.

The prime minister, who has survived many previous sexual and ethical scandals, pledged to step down once they passed both houses of parliament after losing his majority.

As the fourth-largest economy in Europe, a meltdown in Italy would have a massive impact on global markets.

Berlusconi could resign as soon as Saturday night, at which point President Giorgio Napolitano -- whose role is largely ceremonial -- could move to appoint a government of technocrats or call fresh elections for early 2012.

Support appeared to be growing this week for former EU commissioner Mario Monti to take the helm of a technocratic administration. Other names also floated include former Justice Minister Angelino Alfano and Gianni Letta, Berlusconi's chief of staff.

Europe's reluctant savior - the ECB

The structural reforms demanded by the European Central Bank and the European Commission must be brought in without delay, said Emma Marcegaglia, head of the Italian employers' association, Confindustria.

"These reforms are the only thing that can take us out of the current situation," she said. "We have no choice. We cannot wait for three months for the next elections, this would mean the destruction of Italy. "

She said a rapid solution to the political uncertainty in Italy was essential to put it "firmly back on the road to credibility."

She added: "We are not Greece, we are a strong economy, we are the world's eighth largest economy. We have many state assets, and have lots of potential. But we have to survive this very difficult situation."

Italian university student Fabrizio Loretti said it was time for change at the top.

"Berlusconi's legacy is that of a country in cultural and ethical ruins, a country destroyed at a moral level, that needs to be rebuilt from its foundations," he said.

"It will take many years to get back to the situation we were at before him, but also to introduce the changes that are necessary and insert them into a global context, in a world that has changed radically."

Loretti said the new government must make addressing youth unemployment and liberalizing labor laws a priority to restore competitiveness.

Italian borrowing costs continued to ease Friday, after spiking above 6.75% Wednesday, giving investors hope that Italy is finally starting to make some progress toward addressing its massive debt problems.

Yields on Italian 10-year bonds were trading at 6.5% Friday, after dipping as low as 6.43%. While that's still stubbornly above 6%, it's finally moving in the right direction.

It is imperative to keep Italy's 10-year bond yields well below 7% because that was the level that eventually led to bailouts for Ireland, Portugal and Greece.

Currently, Italy -- the biggest bond issuer in Europe -- possesses a massive gross debt of roughly €1.9 trillion, and a debt to GDP ratio of 120%. The country is widely considered to be too big to fail. But it may also be too big to bail.

CNN's Laura Smith-Spark contributed to this report