Italian Prime Minister Silvio Berlusconi, in serious political trouble at home, is expected to give a European summit on Wednesday only vague promises of economic reform instead of the concrete undertakings demanded by European leaders.

Berlusconi has been caught between a tough ultimatum by euro zone leaders and the adamant refusal of his Northern League partners in a centre-right coalition to make more than slight concessions on pensions -- a key plank of the reform programme.

Both Northern League leader Umberto Bossi and analysts said it was unclear whether the Italian promises would be enough to pacify euro zone leaders or markets, but Berlusconi's political position is so weak he has little room for manoeuvre.

The 75-year-old premier, badly weakened by a string of sex scandals, corruption charges and political setbacks, made no comment to reporters as he arrived for the summit.

Initial market reaction to a minimalist reform deal with Bossi was not encouraging, with Italy paying the highest yield in more than three years on six-month BOT bills at an auction on Wednesday.

Political tensions over the reform programme broke into the open in Italy's parliament where opposition and government deputies exchanged blows on Wednesday and the sitting was suspended.

President Giorgio Napolitano, and incoming European Central Bank governor Mario Draghi, warned that Berlusconi's promises must be followed by resolve to take painful measures that will dig Italy out of a deepening economic crisis by cutting massive public debt and boosting stagnant growth.

The head of Italy's biggest retail bank, Intesa Sanpaolo, said he was disappointed by the sketchy agreement reached between Berlusconi and Bossi in late-night talks on Tuesday, which provided for only a slight acceleration in increasing the retirement age from 65 to 67.

In the situation we are in, I expected an economic programme that would be agreed by everyone and not just unconfirmed suggestions to take to Europe. I am disappointed, Corrado Passera told reporters at the margins of a conference.

Bossi refused point blank to sanction a more significant reform abolishing a system under which workers can retire early if they have paid 40 years of pension contributions.


An Italian diplomatic source told Reuters a letter of intent by Berlusconi had arrived in Brussels and the summit's final communique would specifically mention Italy.

The letter outlines Italy's plan for reforms demanded by the EU as a condition for ECB buying of its bonds -- vital to avoid being overwhelmed by repayments on its massive debt.

The 14-page letter is said to contain little detail on growth-boosting measures but promises to balance the budget by 2013 and lists previously agreed reforms.

Incoming ECB chief Mario Draghi said ideas outlined in Berlusconi's letter must be implemented rapidly. Draghi, who is leaving Italy's central bank to take up the new role, said the situation in Italy was confused and dramatic.

Napolitano, who has regularly worked closely with Draghi to try to stave off economic disaster in Italy, said in a speech in Belgium that anybody who wanted to govern the country must grasp the nettle of unpopular economic reforms.

We can no longer dither over the categoric imperative of making a consistent and constant effort to lower our debt, he said.

The euro zone's number three economy is at the centre of the debt crisis. It needs to issue over 600 billion euros in bonds in the next three years to refinance maturing debt.

Berlusconi's office denied he had made a secret agreement with Bossi to resign at the end of the year but the League leader said he was pessimistic about the coalition's survival.

Analysts say Berlusconi is unlikely to last beyond December or January and elections are expected next spring, a year ahead of schedule.

Berlusconi has until now repeatedly said he expected to serve out his term until 2013. But reports are circulating that, caught between demands for action on the economy and the obstinacy of the League, he may throw in the towel sooner.

Analysts say neither the League -- where Bossi's leadership is also under threat from within -- nor Berlusconi's PDL party wants a government crisis before the end of the year because that might tempt Napolitano to appoint a stop-gap government of technocrats to pass urgent reforms.

A delay would enable the centre right to keep control of the way the crisis plays out ahead of elections in the spring.

The centre-left opposition is also in disarray and is thought to be reluctant to take responsibility at this point for highly unpopular austerity reforms.

Italy has a public debt of 1.9 trillion euros (1.7 trillion pounds), equal to 120 percent of GDP, second only to Greece in the euro zone.

The impatience of euro zone leaders at Berlusconi's repeated procrastination is sharpened by fears that a major debt crisis in Italy -- much bigger than Greece and too big to bail out -- would threaten the entire European project.

Economy Minister Giulio Tremonti has promised a package of reforms that would open up closed professions, cut red tape and raise revenue through steps such as privatisations and a new wealth tax, but the measures have been repeatedly delayed.

(Additional reporting by James Mackenzie and Alberto Sisto, Giuseppe Fonte, Stefano Bernabei and Giselda Vagnoni; Editing by Jon Boyle)