Italy pledged to work for a constitutional amendment requiring the government to balance its budget, as Rome feverishly tries to assure domestic and foreign investors its finances are sound and calm a nervous market.
Finance Minister Giulio Tremonti also told a hastily convened news conference Friday night that Italy, aims to balance its budget in 2013, a year before previously scheduled. Premier Silvio Berlusconi, saying he conferred with world leaders, announced that G-7 finance ministers will meet "within days" of the exploding financial crisis.
Berlusconi said he was expecting a phone call later today from President Barack Obama about the global economic woes.
Italy's borrowing costs rose above Spain's for the first time in more than a year, pushing European leaders to interrupt their vacations and look for a response to deepening fears about the health of the eurozone's No. 3 economy.
At the start of Europe's debt crisis 21 months ago, Italy was rarely grouped with the weaker members of the single currency zone, such as Greece, Ireland and Portugal. Many in the markets thought Spain, with its 20 percent unemployment rate, was vulnerable.
But the emergence of Italy as a potential victim over the past few weeks has highlighted just how vulnerable the eurozone is and how insufficient its anti-crisis measures are.
The yield on Italy's 10-year bond stands at 6.09 percent, ahead of Spain's equivalent of 6.04 percent — though both are lower than the euro-era highs earlier in the week and markedly below where they were at the start of the day, they're still not far from the levels that forced Greece, Ireland and Portugal to seek international financial help.
Worries that Italy and Spain maybe next in line led German Chancellor Angela Merkel, vacationing in the Italian Alps, and French President Nicolas Sarkozy, on the French Riviera, to take time from their summer holidays for a phone conference on the eurozone crisis. Spanish Prime Minister Jose Luis Rodriguez Zapatero spoke with Sarkozy and Berlusconi in separate phone conversations Friday.
Their options to what a leading EU policymaker described as "incomprehensible" movements in the markets appear limited.
Even a better than expected U.S. jobs report Friday failed to ease the pessimism that has gripped investors over the past few weeks.
It's only been two weeks since eurozone leaders agreed to expand the powers of its 440 billion euros ($623 billion) rescue fund that helped bail out Greece, Ireland and Portugal. The fund will be able to buy governments bonds and bail out banks, but the new powers will not be in place until parliaments approve the changes in September.
Analysts also warn that the fund is currently not big enough to rescue Italy, whose debt amounts to 120 percent of economic output, around double that of Spain. Only Greece has a bigger proportion to service in the eurozone.
Markets have put increasing pressure on Italy because of its chronically weak growth and a general lack of confidence in Berlusconi's ability or willingness to push through politically difficult measures to make the economy more productive.
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