Italy's Finance Minister & Juncker hold crisis talks
Italian Finance Minister Giulio Tremonti headed into emergency talks Wednesday with eurozone chief Jean-Claude Juncker amid fresh worries of Europe's sovereign debt crisis engulfing Italy and Spain.
Tremonti made no statement on arriving to meet the prime minister of Luxembourg, who also heads the Eurogroup of finance ministers from the 17 nations that share the single currency.
The talks follow a new day of drama on financial markets as Italy and Spain faced soaring borrowing costs that threaten to sweep the eurozone's third and fourth largest economies into a widening Greek-style debt crisis.
As global stocks tumbled on fears of a resurgence of euro problems, Spanish Prime Minister Jose Luis Zapatero delayed vacation plans and Prime Minister Silvio Berlusconi was to address parliament in a bid to unite Italy in efforts to stabilise the country's strained public finances.
The eurozone crisis has already sent Greece, Ireland and Portugal running for bailouts from the European Union and International Monetary Fund.
But Italy is twice as big as the three combined and has a public debt that amounts to 120 percent of its Gross Domestic Product, way above the EU limit of 60 percent.
Just a day after a tense 11th-hour debt deal in the United States and barely two weeks after an emergency eurozone summit in Brussels struck a deal for a second bailoput of Greece in hopes of heading off contagion to Italy and Spain, wary investors have been selling down bonds from both nations.
"Despite numerous attempts, the European authorities have still not done enough to satisfy a sceptical bond market and the debt crisis looks far from over," said Juliet Tennant, economist at Goodbody Stockbrokers in Dublin.
The July 21 summit agreed a 160-billion-euro rescue of Greece -- involving the private sector for the first time -- and also agreed to boost the scope of its rescue fund, the European Financial Stability Fund (EFSF).
Amid growing fears the 440-billion-euro fund would be insufficient to rescue the likes of Italy, European Union President Herman Van Rompuy stepped in Tuesday to try to reassure markets.
"We cannot underline enough that the situation in Greece is unique and is not comparable to those in other eurozone countries," Van Rompuy wrote in a commentary published in Le Monde newspaper.
"Current evaluations of risk on the markets do not correspond at all to fundamentals and it is ridiculous that ... these countries are considered the most likely to default on loan obligations," he added.
With financial market contagion driving demands for a dramatic centralisation of patchwork eurozone economic policy management, sources contacted by AFP at the Italian government, the European Commission and in Juncker's entourage were tight-lipped late Tuesday about what Rome can do to stave off heightening tension.
Debt rescue planning for Italy, Spain and Cyprus was "certainly not on the table," said Chantal Hughes, standing in for Rehn's regular spokesman.
However, "all scenarios have become a possibility, even the most dramatic ones," said Rome economics professor Pierpaolo Benigno.