Italian Prime Minister Silvio Berlusconi is to resign after parliament passes crucial economic reforms aimed at stabilizing Italy’s economy.

Italian President Giorgio Napolitano made the announcement just hours after Mr. Berlusconi won a crucial budget vote in parliament on Tuesday, but lost the support of a majority of lawmakers for his weakened government.

While 308 lawmakers voted in favor of the budget bill, another 321 lawmakers abstained. No-one voted against.

That meant that Mr. Berlusconi failed to gather the 316 votes necessary to have a majority of the parliament back his economic reforms.

Italy is the third largest economy in the Eurozone and the seventh largest in the world. But it faces potential economic crisis caused by a ballooning public debt.

The vote had been seen as a test of confidence in his political leadership.

After more than half the parliament refused to vote, the opposition immediately called for Mr. Berlusconi to step down.

His resignation would end a long, and at times, tumultuous political career.

The debt crisis sweeping the Eurozone has put pressure on Mr. Berlusconi’s government to move quickly to enact unpopular reforms to protect the Italian economy.

Italy has been hampered by a weak government and debts that are considered too large for its European partners to bail out.

But Emiliano Alessandri of the German Marshall Fund in the United States, says even if Mr. Berlusconi left office, Italy’s problems would remain.

He says, “the idea that Italy’s structural problems will be solved by his demise alone is wishful.”