Italy's government presented lawmakers with the budget measures pledged to European Union allies, paving the way for parliamentary votes this week that will lead to Prime MinisterSilvio Berlusconi's resignation.

Finance MinisterGiulio Tremonti delivered the legislation, in the form an amendment to a budget law, to the Senate Budget Committee in Rome today. The measures are aimed at convincing investors that Italy can overhaul its economy to reduce the euro-region's second-biggest debt and stem borrowing costs that have surged to euro-era records.

The Senate is scheduled to vote on the plan on Nov. 11, Senator Roberto Calderoli told reporters today in Rome. The Chamber of Deputies, the lower house, is due to begin reviewing the package on Nov. 12, possibly voting on it that same day or the following day.

The so-called maxi-amendment will raise the retirement age to 67 starting in 2026. It also estimates 15 billion euros in real-estate sales through 2014, Senator Massimo Garavaglia said in an interview.

Berlusconi reiterated today that he will step down as soon parliament passes the measures, as agreed with President Giorgio Napolitano yesterday. The president said today that he will then begin consulting political parties on possibly forming a new government or calling early elections.

Italian bonds plunged after Berlusconi's offer to resign, with the yield on the 10-year benchmark bond surging 47 basis points today to 7.246 percent. Greece, Ireland and Portugal sought bailouts after their yields reached a similar level.

David Fuller's view Surreal, isn't it? All eyes are now on Italy's buffo political opera - high farce mixed with dangerous possibilities.

Here is what spooked the markets today - Italy's 10-year government bond yields (weekly & daily) accelerated higher. Moreover the yield curve has inverted with 2 and 5-year yields even higher - a harbinger of recession when what Italy and the rest of the European Union desperately needs is growth.

So what happens next?

Italy's bond yields will remain a key influence on sentiment, at least until they fall back sharply. That should occur quite soon as trend acceleration, as all veteran subscribers and TCS delegates know, is an ending of unspecified duration because it is unsustainable beyond the short-term. The catalyst for a fall back beneath 6% would be a satisfactory emergency budget from a unity government (see also email 2 below). This is a 'needs must' situation so I expect that to happen.

Meanwhile, we have seen some big downward dynamics by the S&P 500 and Nasdaq 100 today but at least they have a cushion of support underneath.