The government of Italy has failed to agree on financial reforms aimed at reducing its massive deficit, a day before a European summit opens.
Prime Minister Silvio Berlusconi says he will present firm proposals at the meeting in Brussels, but extraordinary cabinet talks have ended without a decision on crucial pension reforms.
His party, the main coalition partner, has rejected proposals to increase the pension age to 67 years.
The EU is demanding concrete action by Wednesday to reassure markets.
Eurozone leaders are due to hold a summit in Brussels on Wednesday to devise a strategy to confront the area's worsening debt crisis.
They are expected to agree a plan to reduce Greece's debt burden, strengthen European banks to withstand bond losses and scale up the eurozone rescue fund.
Italy needs to issue some 600 billion euros ($US835 billion) in bonds over the next three years to refinance maturing debt.
The BBC reports that raising the retirement age is one of the key economic reforms demanded by the EU as a condition for supporting Italy's bonds.
Northern League leader Umberto Bossi dismissed the idea, saying:
''I'm not touching our pensions, which are fine, to bring up the age to 67 just to please the Germans.''
He also dismissed the idea of a government of technocrats being installed to push through reforms.
"The government is at risk," Mr Bossi told reporters in parliament on Tuesday. "The situation is difficult, very dangerous. This is a dramatic time," he said.
As the coalition parties held separate meetings, President Giorgio Napolitano said in a statement that the country must do everything to reduce the risk to government bonds by making its determination to cut public debt more credible.
