Italy and Spain tonight withheld support for an EU growth pact pending pledges of swift support from their partners to help fend off prohibitive borrowing costs, their officials said.

Referring to a so-called "growth pact" to breathe new life into flagging economies, a member of the Italian delegation at an EU summit said that Madrid and Rome had "no reservations on the substance, but want this [pact] to be part of a larger solution."

A Spanish official confirmed this, saying: "We are in favour of the growth pact, we are not blocking it, but there must also be urgent measures."

He suggested that there could be initialling of the pact without short-term measures from the 27-nation bloc to help the eurozone's third and fourth largest economies - Italy and Spain - currently struggling to borrow at affordable rates on sovereign debt markets.

EU president Herman Van Rompuy had said earlier that EU leaders had reached agreement on boosting "the financing of the economy by mobilising around €120bn for immediate growth measures."

Asked about Italy blocking the deal, he added: "There are two countries who are very keen to make sure that there is an agreement both on the long term measures and on the short term measures, but I wouldn't say there was any blockage."

The plan - proposed by the eurozone's four largest economies; Germany, France, Italy and Spain - foresees a package of measures to boost output and create jobs.

The pact would redirect unspent EU funds to the most needy countries and bolster the coffers of the European Investment Bank by boosting its capital base by €10bn.

The EIB says the capital injection would allow it to raise funds in the markets to invest €60bn in innovation, small- and medium-sized companies and infrastructure projects.

In addition, the investment bank will launch joint "project bonds" to finance €4.5bn worth of infrastructure programmes.

Earlier today, Taoiseach Enda Kenny said that a eurozone growth agenda and steps to tackle the immediate banking crisis were the two critical issues facing the summit of EU leaders.

He said Spain, Italy and Ireland all had different banking and economic problems, but each had to be addressed.

The Taoiseach said: "Spain has a liquidity problem. Its problem is different than Italy's problem. Ireland has a legacy debt in respect of banking which is critical for us."

Mr Kenny said he spoke to Italian Prime Minister Mario Monti by telephone yesterday on the debt crisis.

When asked about German Chancellor Angela Merkel's forthright rejection of eurobonds or debt mutualisation, Mr Kenny said he still held out hope that the issue could be accepted.

He said: "Europe is always about patience and about timing - Ireland was one of the first to put forward the measures of direct injections into banks.

"Issues that at first sight, first indications, seem to be rejected inevitably are left on the table and find a way of becoming a reality later on."

Leaders from across the European Union are gathering in Brussels today for the two-day meeting.

The summit comes amid deepening divisions over how to tackle the debt crisis in the short- and long-term.

Meanwhile, the Finnish Minister for European Affairs has said his country is proposing a new form of government bond to help countries like Spain and Italy to reduce their borrowing costs.

Speaking on the margins of the EU summit in Brussels, Alexander Stubb said so-called "covered bonds" had helped Finland borrow money on the international markets in the early 90s when the country was in a deep recession.

The bonds could be backed by the two EU bailout funds, the EFSF or the ESM, if they did not sell or if the borrowing costs did not fall.

The covered bond would be issued by the country in question and the bond would have a guarantee or collateral in the form of assets, earmarked taxes or equity.

"This is what Finland did in the early 90s and it forced interest rates down and helped us out a lot," he told RTÉ News.

"This would have a second element, which is the backing of the EFSF and ESM if these bonds don't sell or the interest rates don't come down.

"The backing could be capped or have a limit at some point. It's a constructive proposal from the Finnish government."

Berlin has so far opposed the use of the EFSF or ESM to buy government bonds directly on the secondary market.