European stocks and the euro tumbled on Wednesday, while Italy's borrowing costs soared, despite Silvio Berlusconi's pledge to resign as leader of the third biggest eurozone economy.
After rising strongly at the start of trading, European equities headed south as the yield on benchmark 10-year Italian bonds soared above 7.0 percent.
"The Italian bond market is in distress this morning," said Kathleen Brooks, an analyst at traders Forex.com.
"Although Berlusconi promised to resign after the passage of austerity reforms get through parliament, the bond market may be reacting to the potential for a fractious coalition government getting in to power, which could only exacerbate Italy's fiscal situation," she added.
In European stock market trade, London's FTSE 100 index slid 1.11 percent to 5,506.37 points approaching midday, Frankfurt's DAX 30 slumped 1.42 percent to 5,877.46 points and in Paris the CAC 40 dropped 1.68 percent to 3,089.97
Italian stocks dived 3.20 percent after Berlusconi announced in Rome late Tuesday that he would step down once a law with reforms aimed at calming the eurozone turmoil was adopted as expected later this month.
One of the biggest drags on the Italian stock market was shares in Berlusconi's Mediaset business empire, which were down around 10 percent.
The euro meanwhile fell to $1.3718 from $1.3836 late in New York on Tuesday.