Italian prime minister Silvio Berlusconi has reached an overnight deal with his allies in parliament on emergency growth measures demanded by the European Union.

The deal with the Northern League averts an immediate government crisis that put Mr Berlusconi's leadership at risk and could give fresh impetus to an EU summit today aimed at saving the euro from the widening sovereign debt crisis.

Mr Berlusconi and Northern League leader Umberto Bossi reached a deal on pensions, part of the EU-demanded measures that the Italian prime minister will deliver later.

Education minister Mariastella Gelmini said on TV that Italy will gradually raise the pension age from 65 to 67 by 2025.

Mr Berlusconi has survived scandals, court cases and dozens of confidence votes, but experts said the economic plan is one of the most critical tests yet of his grasp on the country's leadership.

Previously, he faced resistance from the Northern League, a minority coalition party without whose support his government falls.

The European Union also wanted Italy to change the legal system to encourage investment and pass other reforms to improve growth.

All are measures that have been talked about for years in successive governments, but there has been little political will to see through the unpopular decisions.