ROME — Italy's Cabinet proposed legislation Wednesday to sell off government-owned real estate, encourage investment in infrastructure and privatize local public companies in a bid to avoid becoming the next victim of Europe's debt crisis.
The Cabinet decided to draft the proposals as amendments to budget legislation under consideration by parliament that must be approved by the end of the year, according to a statement from Premier Silvio Berlusconi's office.
They aim is to convince international investors that Italy's government will be able to shoulder its debt and will not need a financial rescue like those required by Greece, Ireland and Portugal.
The fate of Italy is crucial to the wider 17-nation eurozone because it is the region's third-largest economy and would be too expensive to bail out if its borrowing rates rose so high as to block it out of bond markets.
Earlier, government officials had said the government might pass a decree containing some of the measures to show the EU and markets that Italy had taken solid action. In the end, the Cabinet decided to proceed on the legislative track, reportedly after Italy's president suggested the measures would enjoy greater legitimacy if passed by parliament.
A government official said key elements of the amendment include divesting government-owned real estate, privatizing local public companies, measures to encourage investment in infrastructure and liberalizing the labor market.
Berlusconi outlined such measures in a letter to the EU last week after coming under pressure from the EU and markets to come up with solid proposals to boost growth in Italy's anemic economy. Doubts were growing that Berlusconi had the political muscle to push reforms through.
Berlusconi will head to Cannes on Thursday for the G-20 summit of world leaders with the proposed legislation.
A big European plan unveiled last week sought to put a firewall around countries like Italy. But confidence in the country remains weak. Greece's announcement this week that it will hold a referendum on the European rescue triggered fresh turmoil on financial markets, adding market pressure on Italy.
Italy's borrowing rates continued to rise on Wednesday — yields on its 10-year bonds rose to 6.19 percent on the secondary market, 4.34 percentage points higher than the rate on the German equivalent bond, considered the safest in Europe.
The yield is indicative of the rate the Italian government would have to pay if it raised 10-year loans from capital markets.
Bank of Italy governor Ignazio Visco urged the government to "consistently and quickly" honor its EU pledges to reduce its public debt and make structural reforms.
In a forward to the bank's November stability report released Wednesday, Visco said Italy's banking system had a "sound" capital position that will be strengthened, but noted that it is feeling the effect of the debt crisis and economic slowdown.