But it remains to be seen whether the government, a motley patchwork of vested interests held together by a leader who hates to deliver bad news, has the political will to make the sweeping regulatory changes that it never tried before the crisis hit.

With Italy under intense observation from the markets and the European Central Bank, which this week agreed to buy some of its debt in exchange for changes to the labor market, experts say this is a make-or-break moment that will determine the country’s political and economic future.

“Berlusconi’s center-right, accustomed to gliding over problems and promising reforms that it never delivers, now finds itself with its back against the wall,” the political columnist Stefano Folli wrote in the business newspaper Il Sole 24 Ore on Wednesday.

On Wednesday, the government met for the second time in a week with labor unions and business leaders to discuss changes, including pension cuts and tax increases, but no concrete proposals emerged. In Italy, as in most other European countries, such actions require an accord between the government and these so-called social partners.

Ferruccio de Bortoli, the editor in chief of the leading newspaper Corriere della Sera, the country’s most accurate political barometer, wrote that “what hinges on this meeting, it bears emphasizing, is nothing less than the future of the country.”

Yet after the meeting broke up, labor union leaders and the head of Italy’s industrialists’ organization said they were deeply disappointed by the government’s failure to present any concrete proposals, a week after Mr. Berlusconi said he was seeking broad consensus to make radical changes to the labor market and the social welfare system.

Under market pressure last week, Mr. Berlusconi and Finance Minister Giulio Tremonti announced that Italy would reduce its budget deficit from the 3.9 percent of gross domestic product expected this year to zero in 2013, rather than 2014 as planned in a $70 billion package of tax increases and spending cuts passed by Parliament last month.

It is a tall order. “Not even the Lord Almighty knows” how the government will propose to balance the budget by 2013, said Mario Baldassarri, an M.I.T.-trained economist and the chairman of the Senate Finance Committee, who broke with Mr. Berlusconi’s coalition last year. “They decide at the last minute.”

With public debt at more than 120 percent of gross domestic product and a growth forecast of 1 percent, the political costs promise to be high. To square the circle probably means disrupting the social order by cutting pensions and raising taxes, or disrupting the political order by cutting public spending tied to the interest groups now keeping Mr. Berlusconi in power.

“This has become a government of confraternities. To change that today would be a tremendous effort,” said Stefano Micossi, an economist, professor at the Council of Europe and director of Assonime, an Italian business research group. “He doesn’t understand the market, he understands interests,” Mr. Micossi added of Mr. Berlusconi.

Mr. Berlusconi first came to power in 1994, after a huge bribery scandal that brought down the established political order, in which the Christian Democrats, Socialists and Communists for decades presided over a jobs-for-votes system that helped build up the public sector. Since returning to power in 2001, Mr. Berlusconi has largely kept that time-honored system intact, analysts say, but replaced the old political order with the parties in his coalition. For every concession to the Northern League, which backs Mr. Tremonti and is intent on keeping tax revenue local, Mr. Berlusconi also had to throw a bone to the poorer south.

Even after a wave of privatizations in the 1990s, Italy’s economy is still largely connected to the public sector, especially in lucrative areas like infrastructure and health care, and such contracts depend on good connections with the government.

“This system used public spending as compensation, as a tool in the mediation of conflicts between interests,” Mr. Micossi said. “It also crushes market stimulus,” he added. “These state subsidies are the kiss of death, and nothing moves.” They also helped drive up Italy’s public debt, which rose from 109 percent of gross domestic product in 2001 to 120 percent today. (The center-left was in power from 2006 to 2008.)

“Berlusconi’s majority reflects an Italian electorate that has not internalized” free-market principles, said Carlo Secchi, an economics professor and a former president of Bocconi University in Milan. “So you can do certain things to move in this correct direction only if there’s a big threat that comes from outside.”

This week, the Italian news media reported on a letter from the president of the European Central Bank, Jean-Claude Trichet, and the governor of the Bank of Italy, Mario Draghi, to the Berlusconi government, recommending that Italy undertake significant structural changes, including liberalizing state industry and making the labor market more flexible.

According to news reports, the proposals the government is discussing include raising the retirement age for women to 65 immediately, rather than gradually, cutting aid to local governments and increasing property taxes on second homes. In 2008, Mr. Berlusconi won re-election with a campaign that promised to remove property taxes on first homes — and did. Reversing that would help state coffers, but would be a significant political defeat.

Few Italians have confidence in Mr. Berlusconi’s ability to deliver. As Rocco Paradiso waited in line at a post office in downtown Rome, he said he did not have high hopes. “For the past three years the Berlusconi government hasn’t done anything,” Mr. Paradiso said, adding, “Not that previous governments did much more.”