IMF Visit

International Monetary Fund fiscal monitors are due to visit the Italian capital, and European Union Economic and Monetary Affairs Commissioner Olli Rehn says he wants answers to "very specific questions" on economic pledges by the weekend. U.K. Prime Minister David Cameron today said Italian interest rates are "getting to a totally unsustainable level."

"This is a form of meltdown," said Marc Ostwald, a fixed- income strategist at Monument Securities Ltd. in London. "I would imagine the telephones between international finance ministries and central banks are in danger of running so hot they'll melt down themselves."

While Berlusconi said yesterday he'd step down as soon as parliament passes cost-cutting steps pledged to EU leaders, a vote on the measures may not come for weeks. His vow to quit came after he failed to muster an absolute majority on a routine parliamentary vote. He is also seeking elections which may delay reform further.

EFSF Backstop

Failure to restore order may leave Italy joining Greece, Portugal and Ireland in seeking outside help. The first port of call would likely be the 440-billion euro European Financial Stability Facility. A country can now tap a precautionary promise of support of up to 10 percent of its gross domestic product -- about 160 billion euros in Italy's case.

German Finance Minister Wolfgang Schaeuble today told lawmakers that Italy should request aid from the EFSF if it needs it, two people present at the Berlin meeting said.

Higgins at Capital Economics said Italy needs about 650 billion euros to keep out of markets for the next three years, rising to 700 billion euros with support for its banks. Another alternative is the EFSF buys Italian bonds in markets, he said.

A problem is that the rescue fund has about 270 billion euros left after subtracting commitments to Greece, Portugal and Ireland. Governments also have yet to flesh out last month's promise to boost its spending power to 1 trillion euros. With Italy facing bond maturities of about 475 billion euros in the next three years, Citigroup Inc. and Royal Bank of Scotland Group Plc are among those saying the fund needs at least double that amount to insulate Italy and Spain.

Too Big