Raising the stakes in Europe’s debt crisis, Austria’s finance minister said Italy may need a financial rescue due to its high borrowing costs, drawing a furious rebuke from the Italian prime minister.

Eurozone countries have agreed to boost their firewall against the debt crisis.

Spain will be forced to make massive cutbacks next year to bring its budget into line with strict new EU rules, despite missing targets for two years, eurozone ministers decided last night.

A French and German paper to convince the EU to harmonise corporate tax rates met with stiff opposition from a number of countries, including Austria that described it as a “missile”.

Greece edged closer yesterday to winning a new rescue package worth €130 billion as officials said Germany was optimistic a deal could be struck despite misgivings over whether Athens would stick to commitments.

As Athens is caught in the middle of a game of brinkmanship with its creditors, the EU warned they wanted new reforms even before they sign up to the second bailout and its austerity programme.

EUROZONE finance ministers agreed last night to give Greece the next tranche of its EU/IMF loan of €8 billion, ensuring it will not default in the next few weeks, but the battle between France and Germany on extending the firepower of the EU’s rescue fund continued to rage.

The finance chiefs from the eurozone’s 17 countries are in negotiations to overcome differences over how to strengthen a bailout fund, which is key to preventing the union’s debt troubles from spinning out of control.

US SUGGESTIONS for a bigger EU rescue fund met with an ill-tempered response from European finance ministers yesterday.

IMF chief Dominique Strauss-Kahn woke today in a notorious jail on an attempted rape charge as the outside world swirled with questions about the truth of the accusations.

Austria's Finance Minister has called for IMF boss Dominique Strauss-Kahn to step down to avoid damaging the institution in the wake of his arrest for sexual assault.

IRELAND’S focus remains firmly on getting a cut in the interest rate on its bailout, Finance Minister Michael Noonan said as eurozone ministers agreed the details of a €78 billion loan for Portugal at a lower rate of interest.

Austria’s president easily secured a second term, deflecting a challenge by a far-right politician who criticised the country’s anti-Nazi law.

Austria’s far-right parties made huge gains in weekend parliamentary elections, according to preliminary results, while the Social Democrats took the most votes but saw their worst results in decades.