Whatever the official retirement age (60 for women, 65 for men), under Italy’s complex retirement laws anyone qualifies for a pension after 40 years of contributions, and thanks to earlier and more generous programs, many retire even sooner — over half a million Italians retired before age 50, according to a small business group report released this week.

With this week’s deadline for Italy’s reform measures looming, Ms. Merkel and President Nicolas Sarkozy of France took Mr. Berlusconi to the woodshed. You can imagine the chill in the room after Mr. Berlusconi was captured on a wiretapped phone conversation just weeks earlier describing Ms. Merkel’s physical appearance in terms so vulgar that not even most Italian tabloids printed them (although they were widely disseminated on the Internet). Asked at a televised press conference this weekend whether the French and German leaders were reassured that Mr. Berlusconi would carry out the latest promised reforms, Ms. Merkel turned to Mr. Sarkozy, he looked back with an impish grin, Ms. Merkel grinned in return and the room burst into laughter.

In Italy this was taken as an affront to the national character. Milan’s Il Giornale newspaper compared Mr. Sarkozy’s “smirk” to the head butt delivered to the Italian soccer player Marco Materazzi by Zinedine Zidane of France in the 2006 World Cup final — practically fighting words in soccer-obsessed Italy. Even opposition politicians rallied to Mr. Berlusconi’s defense. “No one is authorized to ridicule Italy,” Pier Ferdinando Casini said. “I didn’t like Sarkozy’s sarcastic smile.”

The heated reaction is about much more than a few grins at a press conference. I spoke this week to Domenico Fanuele, managing director for Italy at the law firm Shearman & Sterling, who said, “Italians are losing their sovereignty. Someone else is telling us what we have to do, and within a certain time frame, and this has nothing to do with the democratic process within Italy. This is something that is being imposed from outside. On the one hand, it injects some sanity and rigor and discipline into the system. On the other hand, it’s frightening, because it weakens the democratic process.”

“Only the English language has a word for Berlusconi: ‘strong-minded,’ ” Mr. Fanuele said. “There is no such word in Italian. Italian politics is very subtle. Corriere della Sera, a very serious, conservative newspaper, asked Berlusconi to step aside, which was so open and direct. I’ve never seen this in my life.”

Mr. Berlusconi flatly rejected calls that he resign and denied reports this week that he had agreed to do so in order to get his political allies to agree to the proposed reforms. Whatever his fate, the debate has made clear that what began as an economic crisis for the European Union has inevitably become a political one. Out of the wreckage of World War II, Europe forged an economic and monetary union while trying to maintain the political sovereignty of its countries. “There’s a fundamental problem with the structure of the European Union and its leadership,” Jim O’Neill, chairman of Goldman Sachs Asset Management, said. “The problem is that European actors don’t act in the interest of Europe. They all act in their own domestic political interests. It looks as though the degree of stress has finally brought them to the table.”