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No crisis in Italy, vows Berlusconi

THE European Union has acknowledged that investors are in doubt about the zone's ability to overcome its debt crisis.

European Commission President Jose Manuel Barroso said a surge in Italian and Spanish bond yields to 14-year highs was cause for deep concern even though they did not reflect the true state of the third and fourth largest economies in the currency area.

"In fact, the tensions in bond markets reflect a growing concern among investors about the systemic capacity of the euro area to respond to the evolving crisis," Mr Barroso said. The President urged member states to speed up parliamentary approval of crisis-fighting measures agreed at a July 21 summit to stop contagion from Greece, Ireland and Portugal, which have received EU/IMF bailouts, to larger European economies.

Meanwhile, Spain has confirmed plans to auction up to €3.5bn of bonds today despite the rise in yields.

Italian Prime Minister Silvio Berlusconi, above, told a parliamentary debate in Rome last night that the country would not be drawn into the debt crisis. He said Italy's banks were "solid and solvent" and that it had solid economic fundamentals.

Shares in banks exposed to eurozone sovereigns, particularly in Italy, have taken a hammering and are having growing difficulty in securing commercial funding.