Silvio Berlusconi looks to be spending his last few hours in power after the Italian parliament approved on a package of austerity measures.

Members of the lower house voted 380-26 in favour of the legislation on Saturday afternoon, there were two abstentions.

The reforms, approved by the Senate on Friday, are designed to reassure the markets that Italy will be able to resolve its debt issues.

Among the measures included in the finance bill is an increase in VAT from from 20% to 21% and a freeze on public-sector salaries until 2014.

Berlusconi has said he would step down once the legislation was put in place and markets will be waiting to see how the transition is managed.

He is due to meet Italian president Giorgio Napolitano to resign his position following a final meeting of his cabinet.

It is expected that the former European Commissioner Mario Monti will head a technocratic cabinet to steer the country through its current turmoil.

Italy has come under immense pressure from investors as confidence in its government collapsed and hold-ups in the creation of vital European stability mechanisms drove speculation that the country could be on the verge of seeking debt relief.

The yield on the country's 10-year bonds rose above 7% on Wednesday, although buying by the European Central Bank (ECB) brought the figure down on Thursday.

Berlusconi's imminent departure will rob European politics of one of its most colourful characters, but it will provide some relief for markets that have been battered by the routine disagreements around vital legislation, the slow progress of reform and the public disagreements with the finance minister, Giulio Tremonti, that have characterised the prime minister's crisis response.