Italy’s financial crisis deepened on Wednesday despite a pledge by Prime Minister Silvio Berlusconi to resign once Parliament passes austerity measures demanded by the European Union.

The move failed to convince investors, propelling Italy’s borrowing costs through a key financial and psychological barrier of 7 percent, close to levels that have required other euro zone countries to seek bailouts.

Mr. Berlusconi, cornered by world markets and humiliated by a parliamentary setback, appeared to have become the most prominent victim of the broader European debt crisis. But his decision did not remove wide uncertainty about Italy’s ability to tackle the crisis, and some analysts said the prospect of a protracted period of political wrangling could exert further pressure for a quicker exit from the impasse.

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Filed under: * Economics, Politics • Economy • Credit Markets • Currency Markets • Euro • European Central Bank • The Banking System/Sector • * International News & Commentary • Europe • --European Sovereign Debt Crisis of 2010 • Italy

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