Italy was under intense pressure on the financial markets today along with Spain and other ailing eurozone countries as Brussels ruled out a new debt rescue plan despite record bond spreads.
As newspaper front page headlines bemoaned another "Black Monday" and warned that Italy was still very much "in the line of fire," Finance Minister Giulio Tremonti called a meeting of the country's financial stability committee.
Representatives from the central bank and stock regulator Consob were set to discuss "the sovereign debt market situation and implications for the banks and the economy," at the talks, due to kick off at 1430 GMT, a source told AFP.
Pressure has remained intense on Italy -- which has one of the highest public debt levels in the world and one of the lowest economic growth rates in Europe -- despite wide-ranging budget austerity measures adopted last month.
With fears persisting that the world's eighth and eurozone's third largest economy may be the next country to succumb in the eurozone debt crisis, nervous investors sold down their bonds on Tuesday.
"By now, all scenarios have become a possibility, even the most dramatic ones," Pierpaolo Benigno, economics professor at the Luiss university in Rome, wrote in an editorial for the Sole 24 Ore financial newspaper.
"Our country, the bull, has entered the china shop," he said.
The yield on the Italian 10-year bonds rose to 6.165 percent from 5.988 percent, sparking widespread concern among investors who widely consider rates above 6.0 percent as unsustainable for a slow-growing eurozone country.
The spread with comparable 10-year bonds issued by Germany, the strongest eurozone economy, also widened to a record 3.74 percentage points.
The main FTSE Mib index was down 1.25 percent at 1345 GMT after hitting a low of 3.87 percent on Monday.
"The situation is tense, but we're still far off a crisis," Luca Cazzulani, bond strategist for UniCredit bank, told AFP, adding that he thought it "improbable" that Italy would see its yield curve invert.
An inverted yield curve refers to situation in which interest rates for shorter term loans are higher than for longer term loans, which should carry a higher risk premium to reflect the greater uncertainties over lending far into the future.
The government has cancelled a planned sale of mid and long-term bonds in mid August "due to a favourable cash flow," he said.
The prime minister is set to address parliament on the financial crisis on Wednesday and meet trade union leaders on Thursday, but the opposition has called on Berlusconi to follow Spain's example with early elections.