(CNN) -- Europe's financial crisis claimed its second scalp in three days when Italy's Silvio Berlusconi announced he will step down after parliament approves new austerity measures in an effort to stave off economic collapse.





The scandal-plagued prime minister will follow his Greek counterpart George Papandreou into early retirement as fears grow that Italy, the eurozone's third largest economy, may default on its debt.





Italy has failed to implement austerity measures designed to reduce its mammoth â‚¬1.9 trillion debt load -- nearly six times that of Greece -- and the cost to the country of borrowing more money to pay off that debt is spiraling out of control.





While no one knows yet whether Italy will default, analysts say that the country is vastly too big to bail out -- and that the consequences for the world economy of a default would be a disaster.





What happens next?





Much like Greek premier Papandreou, Berlusconi said he will not resign until the government passes harsh austerity measures recommended by eurozone leaders aimed at trimming Italy's debt.





The next step is for the Italian parliament to consider and vote on the measures -- which include tax rises and an increase in the retirement age -- within the next several weeks.





After the parliamentary votes Berlusconi will tender his resignation to President Giorgio Napolitano, who will then begin consultations with lawmakers to decide whether to form a government or call for elections.





Berlusconi and members of the Northern League party want elections as soon as possible, but other lawmakers and European leaders would like to see an interim government composed of non-partisan technocrats that could quickly implement austerity measures in order to reassure global markets and restore confidence in the country.





Business figures tapped to lead a potential technocratic interim government include Luca Cordero di Montezemolo, chairman of Ferrari, and Alessandro Profumo, former CEO of Italy's largest bank UniCredit.





Political options that have been floated include Angelino Alfano, known to be Berlusconi's hand-picked successor, Gianni Letta, Berlusconi's chief of staff, or Mario Monti, a former commissioner with the European Union.





No one is a fan of uncertainty, and no one is going to invest in a debt-ridden country without a plan for recovery -- much less one without a functioning government -- so Italy's short-term plan will be to get these austerity measures passed, see Berlusconi off, and hold new elections so at least international lenders will know who they're dealing with.





Check out CNN's interactive map of European debt at a glance





What's wrong with Italy?





The basic problem is that it's becoming prohibitively expensive for Italy to borrow money to finance its debt -- a problem rooted in investor confidence in the debt-laden country.





With a defunct government and a shrinking economy, Italy is finding it increasingly difficult to find people willing to lend it money in order to reduce its mammoth â‚¬1.9 trillion debt load, which is nearly six times that of Greece.





The less confidence there is in a country, the higher the bond yields, or rate, that country will have to pay in order to secure more money. Right now confidence in Italy is at a euro-era low, which means Italy is paying more than ever to finance its debt.





Business 360 blog on Italy: Too big to fail, too big to bail





What is a bond yield?





A bond yield is basically another term for the rate Italy has to pay to lenders who buy its government bonds. The 10-year government bond is the standard bond used to measure the relative interest rates from country to country.





A government raises money to pay its bills by selling these bonds -- so the higher the yield or rate, the more it costs Italy to borrow money in order to pay its debts.





Italy's 10-year bond yield hit a staggering record high of 7.3% on Wednesday morning; by contrast, the bond yield for Germany -- a relatively healthy economy -- closed at 1.8% on Tuesday night.





Italy will already have to borrow at least â‚¬300 billion -- nearly the total Greece owes to lenders -- next year alone to pay off maturing debts, and the
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