Italy vows to balance budget earlier than planned

Italy is pledging to work for a constitutional amendment requiring the government to balance its budget as Rome feverishly tries to assure domestic and foreign investors its finances are sound andcalm nervous markets.

Finance Minister Giulio Tremonti also told a hastily convened news conference Friday night that Italy aims to balance its budget in 2013, a year before previously scheduled.

Prime Minister Silvio Berlusconi, saying he had conferred with world leaders, announced that G7 finance ministers will meet "within days" to discuss the exploding global financial crisis.

Later, his spokesman clarified that convening an "extraordinary meeting" of the G7 finance ministers was still "at the reflection stage" with no decision yet taken, although Italy favoured having one.

Berlusconi said he was expecting a phone call from U.S. President Barack Obama about the global economic woes.

Italy's borrowing costs rose above Spain's for the first time in more than a year, pushing European leaders to interrupt their vacations and look for a response to deepening fears about the health of the eurozone's No. 3 economy.

At the start of Europe's debt crisis 21 months ago, Italy was rarely grouped with the weaker members of the single-currency zone, such as Greece, Ireland and Portugal. Many in the markets thought Spain, with its 20 per cent unemployment rate, was vulnerable.

But the emergence of Italy as a potential victim over the past few weeks has highlighted just how vulnerable the eurozone is and how insufficient its anti-crisis measures are.

The yield on Italy's 10-year bond stands at 6.09 per cent, ahead of Spain's equivalent of 6.04 per cent. Though both are lower than the euro-era highs earlier in the week and markedly below where they were at the start of the day, they're still not far from the levels that forced Greece, Ireland and Portugal to seek international financial help.

Worries that Italy and Spain may be next in line led German Chancellor Angela Merkel, vacationing in the Italian Alps, and French President Nicolas Sarkozy, on the French Riviera, to take time from their summer holidays for a phone conference on the eurozone crisis. Spanish Prime Minister Jose Luis Rodriguez Zapatero spoke with Sarkozy and Berlusconi in separate phone conversations Friday.

Their options to what a leading EU policymaker described as "incomprehensible" movements in the markets appear limited. Even a better than expected U.S. jobs report Friday failed to ease the pessimism that has gripped investors over the past few weeks.