An Italian minister says the European Central Bank has agreed to start buying up Italian bonds from Monday in return for a promise from the government to accelerate deficit cuts.
Federalism Reforms Minister Umberto Bossi told reporters that the ECB would move after prime minister Silvio Berlusconi pledged to bring forward austerity measures and bring Italy's budget into balance by 2013, a year ahead of the original plan.
Mr Berlusconi also said Italy and France planned to call an emergency meeting of G7 finance ministers on the euro zone debt crisis. He told reporters that the meeting would be held 'in a few days'.
'The situation is very difficult and requires coordinated action. We have to recognise that the world has entered a global financial crisis that concerns all countries,' Mr Berlusconi said after talks with several European leaders.
'Nothing that is happening can be blamed on any one government. It is something that concerns the global financial situation.'
The ECB on Thursday said it would resume buying euro zone government bonds in the market, but disappointed investors by appearing to limit the purchases to Portuguese and Irish debt.
Mr Berlusconi and Spanish prime minister Jose Luis Rodriguez Zapatero feel that the 'strong fluctuation and speculative movements' of their country's borrowing costs are 'difficult to understand', the Spanish government said today.
Mr Zapatero spoke to Mr Berlusconi by telephone today to discuss the 'evolution of the risk premium of both countries,' it said in a statement.
Earlier, the risk premium demanded by investors for bonds from Italy and Spain, the euro zone's third and fourth largest economies, hit the highest levels since the creation of the euro amid concerns over their debt and deficit levels. But yields on their 10-year bonds later fell on hopes that the ECB was preparing to enter the market.
'Both leaders feel that the strong fluctuations and speculative movements of the sovereign debt markets are difficult to understand,' the Spanish statement added.
Mr Zapatero also spoke to French president Nicolas Sarkozy by telephone to discuss the state of the economy, the statement said.
'Both agreed on the need to apply the agreements reached by European leaders on 21 July as soon as possible and they reaffirmed their determination to defend the stability of the euro zone,' it added.
The two leaders also reiterated 'the need for different governments to cooperate and coordinate their actions on the global stage in the face of the fears, which have emerged in recent over the state of the world economy.'
Mr Sarkozy's was also in contact with US president Barack Obama about this week's market turmoil, following phone calls with his German, Spanish and Italian counterparts.
France holds the presidency of the Group of 20 this year.
Markets not convinced by EU deal - Olli Rehn
Earlier, EU Economic & Monetary Affairs Commissioner Olli Rehn has admitted that financial markets have been disappointed by last month's EU agreement aimed at tackling the euro zone debt crisis.
He was speaking as stock markets continued to take heavy falls due to fears that the crisis is spreading, and worries about a wider global economic downturn.
In a press conference in Brussels, he said there had been 'difficulties in communicating' what was a complex agreement.
But Mr Rehn said markets had unrealistic expectations that all of the measures involved would be implemented straight away.
Mr Rehn said EU officials were working 'night and day' to finalise the euro zone rescue plan, and that it would be ready 'in weeks, not months'.
He also said pressure on countries such as Italy and Spain in the bond markets was not justified by economic fundamentals, adding that they would not need a bail-out.
Mr Rehn also called for Europe's rescue fund - the €440 billion European Financial Stability Facility - to be increased and its scope widened. 'To be effective, the EFSF needs to be credible and respected by the markets. Thus it will need to be continuously assessed,' he said.
