Finance ministers are to hold crisis talks amid the global market turmoil as EU commissioner Ollie Rehn warned of consequences over the European debt crisis.
This evening, following further falls in shares, Italian prime minister Silvio Berlusconi said he agreed with French president Nicolas Sarkozy to hold an early meeting of G7 finance ministers. Speaking at a Rome press conference, Mr Berlusconi did not name a date.
Finance ministers are due to meet September 9th-10th in Marseille, France.
Speaking at a hastily called news conference after markets closed, Mr Berlusconi promised Italy would bring forward austerity measures passed last month and get the budget into balance by 2013, a year ahead of the original schedule.
"We consider it appropriate to introduce an acceleration of the measures which we introduced recently in the fiscal planning law to give us the possibility of reaching our objective of balancing the budget early, by 2013 instead of 2014," he said.
Elsewhere, US stocks closed out its worst week in more than two years today in a volatile session that saw major averages whip back and forth before the S&P 500 settled with a slim loss.
Based on the latest data, the Dow Jones industrial average was up 60.93 points, or 0.54 per cent, at 11,444.61. The Standard & Poor's 500 Index was down 0.70 of a point, or 0.06 per cent, at 1,199.37. The Nasdaq Composite Index was down 23.98 points, or 0.94 per cent, at 2,532.41.
For the week, the Dow fell 5.8 per cent, the S&P 500 dropped 7.2 per cent and the Nasdaq lost 8.1 per cent.
Earlier today, investors saw a buying opportunity following the sharp sell-off that took the S&P 500 down 10 per cent over the last 10 sessions.
In early afternoon trading, the stock market had extended its rebound after Mr Berlusconi said Italy will introduce a constitutional principle of a balanced budget, adding that: "We will accelerate measures" in an austerity programme, with the "aim of a balanced budget in 2013."
It was reported earlier this evening that the European Central Bank is demanding that Italy commit to fast-track specific welfare reforms and a constitutional amendment enshrining a fiscal rule before it will buy Italian bonds
Earlier today, European shares fell and posted their biggest weekly decline in nearly three years on worries about weak global growth and fears that the euro zone debt crisis could engulf Italy and Spain.
European shares closed lower this evening as as a better-than-expected US payrolls report did little to alleviate fears of a double-dip recession, and concerns persisted about the euro zone's debt crisis.
MSCI's All-Country World Index fell 2.7 per cent, while European stocks fell 1.7 per cent.
The Dublin market has closed 1.5 per cent lower at 2506.48. London's FTSE-100 was down 2.1 per cent, Germany's DAX dropped 2.8 per cent and France's CAC 40 index slipped 1.3 per cent.
Mr Rehn, EU commissioner for economic and monetary affairs, said today that markets had not reacted as "expected or hoped for" to the measures agreed by euro-area heads of state and government last month. He pledged that European leaders were doing was was necessary to implement the agreement "fully and as rapidly as possible".
"The spread of bond-market tensions across the euro area is, however, not justified by economic and budgetary fundamentals," he said.
"Economic recovery is proceeding in most parts of the euro area, while important steps in budgetary consolidation and structural reform are under way across Europe and in particular in those member states most exposed to market tensions."
He also reiterated today that private sector involvement in the second financing package for Greece would not be repeated for Ireland or Portugal.
Mr Rehn described the agreement reached on July 21st as "a milestone in our management of the sovereign-debt crisis" but acknowledged there had been difficulties in communicating the agreement to the markets.
"Such a comprehensive, detailed and technically complex agreement requires time to implement. But there were expectations in financial markets that all elements could be implemented immediately," he said. "While these expectations were clearly unrealistic, markets have nevertheless been disappointed."
Mr Rehn estimated that the technical and political processes should be finalised by early September.
The July 21st deal on the expansion of the European Financial Stability Facility (EFSF), the €440 billion rescue fund, has yet to be enacted in national parliaments.European Commission president José Manuel Barroso yesterday called for a rethink of the EFSF rescue mechanism that funds weak countries such as Ireland and may have to support Italy and Spain.
A divided ECB restarted its bond-purchase programme yesterday following a four-month hiatus. The central bank refused to extend the purchases to Italy and Spain, the two countries at the centre of the current turmoil.
Over the opposition of the German central bank, the ECB bought bonds of Ireland and Portugal yesterday, two countries drawing on official aid. The ECB stopped short of buying Italian bonds, and ECB president Jean-Claude Trichet said Italy has to show it is "ahead of the curve" in taming its debt.
"Certainly the ECB is ready to make major efforts to relieve the situation, but first the countries have to take steps," ECB council member Luc Coene told RTBF radio in Brussels today.
"It doesn't make sense to pour water into a bucket with a hole in it."
World stock markets have lost more than $4.4 trillion since July 26th as speculation mounts that the global economy faces a new recession that would deepen Europe's debt woes.
Additional reporting: Bloomberg, Reuters
