Italy, under fierce pressure from financial markets and European peers, agreed to have the International Monetary Fund (IMF) monitor its progress with long-delayed reforms of pensions, labour markets and privatisation, senior EU sources said on Friday.
Prime Minister Silvio Berlusconi, with his government close to collapse, agreed to the step in late-night talks with euro zone leaders and US President Barack Obama on the sidelines of the G20 summit here.
"We need to make sure there is credibility with Italy's targets - that it is going to meet them. We decided to have the IMF involved on the monitoring, and the Italians say they can live with that," one EU source said.
The European Commission and IMF would report separately on Italy's progress, he said.
The move came after a European ultimatum made Greece step back from a referendum that could have triggered its exit from the euro area, and agreed to seek national consensus in support of a new ¤130 billion ($178 billion) bailout.
Greece's future in the euro zone may hinge on a vote of confidence in Socialist Prime Minister George Papandreou late on Friday night.
If he wins, government sources say he has pledged to step aside and make way for an interim national unity government that would enact the EU/IMF bailout plan and pave way for early elections next year.
If he loses, Greece may face a hard default of its massive debt, and a possible exit from the 17-nation single currency area.
Boost for IMF
The leaders of France, Germany, Italy, Spain, the European Central Bank, the IMF and European Union institutions also discussed with Obama ways of ramping up the IMF's warchest to help prevent contagion from the euro zone's debt crisis plunging the world economy back into recession.
The boost, mostly from large emerging countries, could be in the range of $300-350 billion.