Even Italian Prime Minister Silvio Berlusconi's legendary ability to survive crisis appears to have vanished. His number one ally said he should resign.

Reuters:

Silvio Berlusconi's closest coalition ally, Umberto Bossi, told him to resign on Tuesday in what could be a mortal blow to the Italian prime minister before a crunch vote in parliament.

Bossi, head of the devolutionist Northern League, said the 75-year-old media magnate should be replaced by Angelino Alfano, secretary of the premier's PDL party.

"We asked the prime minister to stand down," Bossi told reporters outside parliament.

Berlusconi had remained defiant ahead of Tuesday afternoon's vote on a public finance measure, rejecting calls from all sides to step down.

But Bossi's action could tip the balance against him as red lights flash on bond markets about Italy's instability.

The League, together with many members of the PDL, were believed to want Berlusconi to make way for a new center-right government capable of tackling a huge economic crisis and restoring the confidence of markets without handing power to a transitional administration.

Earlier, in another sign that Berlusconi's grip on power was sliding, five PDL rebels said they would not take part in the vote on public financing, due to follow a debate starting at 1430 GMT, putting his majority in serious danger.

Part of Italy's problem is one of perception. No one believes Berlusconi can guide the Italian economy through its current crisis. That perception feeds the bond markets where Italy's costs to borrow cash to finance its growing deficit are reaching "unsustainable levels:"

Rome has displaced Athens as the epicenter of the euro zone's sovereign debt crisis, with government bond yields nearing unsustainable levels that could force the bloc's third largest economy to seek a bailout that Europe cannot afford.

Italian 10-year borrowing costs touched a new record of 6.71 percent on Tuesday, raising the risk that Rome's massive debt -- the second highest in Europe at 120 percent of gross domestic product -- could spiral out of control.

"Now we are really reaching very dangerous levels ... We are above yield levels in the 10-year where Portugal and Greece and Ireland issued their last bonds," said Alessandro Giansanti, a rate strategist at ING.

With no real european central bank that would be a lender of last resort, and with the IMF incapable of mustering the kind of cash Italy would need to avoid default, all the world can do is stand by helplessly while Italy goes into a debt death spiral.

It could be avoided if perceptions change. And that would require Berlusconi to resign - something that may happen as early as today.