Italy's borrowing costs continued to rise on the bond markets today, as the prospect of a new government failed to ease concerns about the euro zone's debt crisis.
Spain was also forced to pay higher interest rates in its latest bond auction.
The yield on 10-year Italian bonds rose to stand at 7.276% this evening, while the Spanish equivalent jumped to 6.598% ahead of a general election on Sunday.
Levels above 7% are seen by many economists as unsustainable. Yields moved above that level for the first time since Friday, when expectations for a new government helped to ease pressure on Italy.
Traders said today's rise came in spite of reported buying of Italian debt by the European Central Bank.
Meanwhile, Prime Minister designate Mario Monti will form a new Italian government tomorrow to face the crisis that has brought Italy to the brink of economic disaster and endangered the entire euro zone.
A statement from the presidential palace announced that Monti, appointed only on Sunday, would meet head of state Giorgio Napolitano tomorrow morning to confirm he can form a government. He is expected to announce a cabinet composed mainly of technocrats.
Monti has completed the process of forming a government in less than three days, much less than normal, as Italy races to ward off a major financial and political crisis that has pushed its borrowing costs to untenable levels.
The new administration led by former European Commissioner Monti must push through a tough austerity programme demanded by European leaders to restore shattered confidence in Italy.
Mario Monti said tonight he was "absolutely convinced" the country will overcome an unprecedented debt crisis.
Earlier this morning, Spain also paid sharply higher interest rates in its latest auction of government bonds. Spain's central bank said it raised just under €3.16 billion in an auction of 12-month and 18-month bonds.
It paid rates of 5.022% for the 12-month bonds and 5.159% for the 18-month debt, compared with rates of less than 4% in a similar auction on October 18.
Greece also raised €1.3 billion in a sale of three-month treasury bills with return to investors rising to 4.63%, the debt management agency (PDMA) said.
