Italy to vote on austerity measures

The measures are also likely to be approved by the lower house at the weekend, paving the way for Prime Minister Silvio Berlusconi to resign.

A technocrat government possibly led by former EU commissioner Mario Monti is being debated.

On Thursday, Italy raised €5bn from new government bonds.

But this was at an interest rate of 6.087% to borrow the money for one year.

The upper house is due to begin its debate on the austerity law at 11:30 GMT with a vote expected in the evening.

Berlusconi, who lost his parliamentary majority in a vote on Tuesday, has promised to resign after the austerity measures are passed by both houses of parliament.

Italy's leaders are desperate to signal that they can bring the country's finances under control, said a BBC correspondent in Rome, and they are moving fast.

Monti, a well respected economist, is exactly the sort of man that the money markets would like to see take charge at this time of crisis.

The Italian president has made Monti a senator for life, meaning he will be eligible to take part in Friday's vote.

President Giorgio Napolitano said he wished to "dispel any doubt or misunderstanding" on when Berlusconi would fulfil his promise to resign.

If the lower house completes its vote on Saturday, President Napolitano could accept Berlusconi's resignation as early as Saturday evening.

He could then formally ask Monti to form a government of technocrats.

On Wednesday, the interest rate on 10-year Italian government bonds touched 7%, the rate at which Greece, Ireland and Portugal were forced to seek bailouts from the EU.

An EU team has begun work in Rome, monitoring how Italy plans to cut its crushing debt burden, 120% of annual economic output (GDP).

The Italian economy has grown at an average of 0.75% over the past 15 years.