Europe sought on Wednesday to ease "unwarranted" pressure on economic giants Italy and Spain, with Prime Minister Silvio Berlusconi calling for his country to urgently adopt a plan to revive growth.After a day of drama that saw borrowing costs for Italy and Spain soar to record heights, bond markets steadied as the premiers of Europe's third and fourth biggest economies responded to renewed pressure over their strained public finances."We need an immediate plan of action which responds to the markets" that want to see that Italy take steps necessary to attain growth needed to keep on top of its massive debt, Berlusconi told lawmakers in an address.Berlusconi insisted that Italy had "solid economic fundamentals" and the government needs to approve "as soon as possible" fiscal reforms in order to have "a tax regime that is more favourable for families, workers and businesses."He also underlined the need for labour market reforms and competition.Spanish Prime Minister Jose Luis Rodriguez Zapatero abandoned his holiday to return to Madrid and was to hold an emergency meeting on the crisis late on Wednesday.
Euro powerhouse Germany played down the turmoil, however, with a government spokesman saying the market movements were "amplified" because summer trading was at a low level, adding that Berlin was confident reforms put in place by Rome and Madrid would convince the markets.But there were calls for action from the European Central Bank."We don't really understand the absence of anyone imposing their criteria and calming the markets," said Angel de Molina Rodriguez, director of analysis at Spanish brokerage Tressis."If they don't take more serious measures to chase out the speculators via a bond purchase or concerted action with other central banks... at least they can send a message to say that this cannot carry on."The ECB's governing council meets on Thursday, with the market anxious for signals from its President Jean-Claude Trichet that it may intervene and resume purchases of government bonds despite a reluctance to do so.EU executive chief Jose Manuel Barroso said market pressure was "clearly unwarranted on the basis of economic and budgetary fundamentals" in Italy and Spain and "the steps that they are taking to reinforce those fundamentals."But he vowed to speed up plans to tighten governance among the 17 nations using the euro -- agreed at an emergency summit only two weeks ago called to stop Greece's debt crisis spreading to Italy and Spain.This week's renewed tensions reflected growing concern "about the systemic capacity of the euro area to respond to the evolving crisis," Barroso said.The extraordinary July 21 summit agreed a new 160-billion-euro ($226 billion) bailout of Greece which, for the first time, took the risk of involving the private sector -- meaning banks and pension funds with Greek debt would incur losses.Moving to reassure markets already edgy over US debt woes and stagnant growth, Barroso reiterated that private investor involvement in a euro rescue was "a unique solution" to end the crisis in Greece.It would not be "a standard feature of the euro area’s crisis management," he said.The eurozone crisis has already sent Greece, Ireland and Portugal running for bailouts from the European Union and International Monetary Fund.But Italy is twice as big as the three combined and has a public debt that amounts to 120 percent of its gross domestic product, way above the EU limit of 60 percent."Despite numerous attempts, the European authorities have still not done enough to satisfy a sceptical bond market and the debt crisis looks far from over," said Juliet Tennant, economist at Goodbody Stockbrokers in Dublin.