Italy's Berlusconi rules out early elections

Italian Prime Minister Silvio Berlusconi on Saturday ruled out calling early elections to stem market panic that has pounded Italian assets and forced his government to bring forward austerity measures.

Berlusconi's conservative government has been weakened by infighting, and the leftist opposition has called for a government of technocrats to restore credibility in the country's finances. Italy is due to go to the polls in 2013.

But Berlusconi dismissed any suggestion of emulating Spain, where Prime Minister José Luis Rodríguez Zapatero has called an early election to tackle the crisis.

"This has absolutely not been talked about," Berlusconi said when asked about bringing elections forward to 2012.

"This has never been an option."

Fears over the euro zone debt crisis spiralling out of control sent Italian bond yields to 14-year highs and the Milan bourse to more than two-year lows this week.

European policy makers fear a debt emergency in the euro zone's third largest economy could overwhelm bailout mechanisms set up to help smaller troubled countries such as Greece or Ireland.

After vague pledges to step up economic reforms failed to convince markets earlier in the week, Berlusconi promised on Friday to bring forward austerity measures and balance the budget by 2013, a year ahead of schedule.

A 48 billion euro austerity plan passed in parliament last month was widely criticised for delaying most cuts until after the scheduled 2013 elections and doing nothing for growth.

The latest pledge got a frosty reception from the opposition and Italy's biggest union, but was welcomed by analysts and the European Union's top economic official.

"This will help to boost potential growth, secure budgetary retrenchment and bolster market confidence," European Economic and Monetary Affairs Commissioner Olli Rehn told Reuters in the first EU response to Berlusconi's announcement.

"The essential thing is rigorous implementation."