Italian borrowing costs rose to a record level today, as prime minister Silvio Berlusconi denied reports that he was about to resign.
The yield on 10-year Italian bonds rose to 6.68% this evening, reflecting acute market pressure on the Italian government over its public finances.
The yield was 6.371% at the close of trading on Friday after Italian public finances came under regular scrutiny by the International Monetary Fund and European Union as a result of the Cannes G20 summit.
Greece, Portugal and Ireland all applied for financial assistance from the EU and the IMF once borrowing costs breached the 7% barrier.
Political instability in Rome is exacerbating market reaction as investors fear Silvio Berlusconi's ruling coalition will be unable to deliver the budget reforms necessary to ensure Italy can continue to pay its own way.
One of his ministers, Gianfranco Rotondi, said Italy must hold elections if the government fails to command a majority in parliament in a crucial vote tomorrow.
The European Commission today pressed Italy to commit to budget cuts, confirming that it was sending a monitoring mission this week to ensure that Berlusconi's government follows through on promised measures to slash a massive debt.
"It is essential now that Italy will stick to its fiscal targets, ensure their implementation and intensify the structural reforms that can boost growth," EU economic affairs commissioner Olli Rehn told reporters ahead of a key meeting of euro zone finance ministers.
Rehn used a football analogy to try and connect with the Italian public, saying that "it's important that in fiscal policy Italy plays catenaccio" - a cynical defensive style intended to give nothing away to the opposition.
The Commission has sent a questionnaire to Rome asking the government to clarify what "concrete action plans" will be undertaken and the timeline for implementing the measures, Rehn's spokesman said.
Italian finance minister Giulio Tremonti is expected to provide these clarifications at the euro zone talks, said the spokesman, Amadeu Altafaj.
France to raise corporation tax rate
French Prime Minister Francois Fillon has announced new austerity measures, including a plan to increase the retirement age.
He also plans to raise the country's corporation tax rate by five percentage points, while VAT on many goods and services will go up by seven points.
Mr Fillon said the government's flagship reform of raising the retirement age from 60 to 62 will be brought forward from 2018 to 2017.
ECB doubled bond buys last week
The European Central Bank said today that its purchases of euro zone bonds more than doubled to just over €9.5 billion in the past week.
In the previous week to October 28, it had bought €4 billion of euro zone government bonds. The ECB, as usual, did not specify which government bonds it had bought.
The bank has now bought a total €183 billion in euro zone government bonds since it first began such operations early last year as part of efforts to ease debt strains in the 17-nation bloc. It resumed major purchases in August when renewed strains pushed Italian and Spanish borrowing rates to unsustainable levels.
