EUROPEAN policymakers tried to turn a more powerful fire hose on the eurozone debt crisis yesterday but financial markets were unimpressed with their response.

ITALIAN Prime Minister Silvio Berlusconi, facing record bond yields and calls for his resignation, said Italy is “up to the task” of tackling the debt crisis as its economic fundamentals are solid.

THE European Union voiced support for Italy and Spain under attack on financial markets but acknowledged that investors now doubt whether the eurozone can overcome its sovereign debt woes.

FINANCIAL market pressure on Italy intensified last night, sucking Europe’s second biggest debtor nation deeper into the euro area danger zone and prompting emergency consultations in Rome, Madrid and other European capitals.

ITALIAN and Spanish 10-year bonds dropped yesterday, pushing yields up to euro-era records versus benchmark German bunds, on concern that slowing growth will hamper efforts to tame the nations’ debt loads.

ITALIAN Prime Minister Silvio Berlusconi’s main coalition ally has warned the government could collapse over an unpopular austerity plan.

Beleaguered premier Silvio Berlusconi has come under pressure on two fronts: his crucial coalition ally demanded tax cuts or early elections, and Italy's credit rating appeared in danger due to high public debt and a laggard economy.

IRELAND has been advised to “think outside the box” by the Hungarian finance minister, Gyorgy Matolcsy, whose government rejected IMF and EU demands for austerity measures earlier this year.

Ministers have approved €24.3bn in budget cuts for 2011-2012 to protect Italy from the market speculation that pushed Greece to the brink of bankruptcy.

Italy’s Premier Silvio Berlusconi said today that the European Union should intervene in the planned French energy merger aimed at blocking a potential hostile bid from Italian energy company Enel.

Prosecutors have notified the embattled governor of the Bank of Italy that he is under investigation for his role in a takeover battle between two banks, and that they plan to question him, his lawyer said yesterday.

Silvio Berlusconi was sworn in as premier of Italy’s 60th government in as many years today, after naming a team of ministers that closely resembles the one he led until stepping down days earlier during a power struggle with allies.

ITALY joined France and Germany in successfully breaching the 3% budget deficit limit without getting an early warning from Eurozone ministers yesterday.