In a letter to the daily La Repubblica, Luca Cordero di Montezemolo, chairman of sportscar maker Ferrari, said that Italy had reached “the point of no return,” reflected in 10-year bond yields back at unsustainable levels of 6 percent.

“There is not a minute to lose. The savings of Italian people, social cohesion and Italy’s membership of the euro are all at risk,” he said.

“We do not have time to wait for the natural evolution of the political situation,” he said. “The prime minister has to realize that the only way to save the country is through a government of public safety.”

Berlusconi’s divided center-right coalition has come under growing pressure as Italy has sunk deeper into trouble and European Union partners have demanded reforms to stem a crisis that now threatens the entire single currency.

Italy, the euro zone’s third largest economy with a public debt equivalent to 120 percent of gross domestic product, has moved to the center of the crisis as fears have grown that market pressure could create an emergency that would overwhelm the bloc’s defenses.

Its sluggish economy faces a growing risk of recession next year and Italian 10-year bond yields have climbed back up over 6 percent, despite the efforts of the European Central Bank to hold down yields by buying Italian bonds.

Berlusconi, mired in scandal and facing four separate trials over prostitution and tax fraud charges, has rejected calls to step down, repeating on Friday that he intended to serve out his term until 2013.
 

However there is growing speculation that the government will fall early in the new year, taking the country to the polls in the spring, the period when Italian elections are traditionally held.

Berlusconi has survived numerous confidence votes in parliament this year but his coalition partners in the Northern League have expressed increasingly open doubts about whether the government can continue.

However they have insisted that the only option would be new elections and have rejected the idea of an interim “technical government” led by an independent outsider which would be charged with passing reforms.

If the government did fall after losing a confidence vote in parliament, it would be up to President Giorgio Napolitano to decide whether to call new elections or whether to appoint another prime minister to try to form a new majority.

Senior political figures on both the government and opposition sides say Berlusconi appears to want to keep going until at least the end of the year in the belief that Napolitano would be more likely to appoint a new prime minister if the government fell immediately.

The letter from Montezemolo adds to a growing chorus of criticism from sections of the Italian establishment ranging from the main employers federation Confindustria to leading daily newspapers and the Catholic Church.

Montezemolo, who has no formal party allegiance, said a package of reforms promised to the EU last week, including rules to make it easier for employers to lay off staff and make civil servants redundant, were “manifestly insufficient given the gravity of the situation.”

He proposed a five-point reform program to cut the cost of politics, reform labor laws, shift the tax burden from labor costs to assets, overhaul the pension system and open up protected sectors to competition.