(FT) -- Italy's borrowing costs soared to their highest level in over a decade amid highly volatile trading as market contagion from Greece forced Silvio Berlusconi to appeal for national unity and "sacrifices" to cut the nation's debt mountain.
"We are in the front line of this battle," Mr Berlusconi said, describing a crisis that threatened all of Europe and the future of its common currency.
The Italian prime minister's appeal -- the most sombre in his three years in charge of his centre-right government -- was intended to rebut widespread criticism in the Italian media and the markets that his coalition was rudderless and divided by disputes between him and Giulio Tremonti, finance minister.
"We have to eliminate any doubts over the efficacy and credibility of our budget," Mr Berlusconi said, insisting that the €40bn package would eliminate Italy's budget deficit by 2014.
Opposition party leaders in Rome pledged their co-operation in parliament to pass the government's three-year austerity programme by Friday in time for a possible emergency summit of EU leaders in Brussels that day.
"This would be a record in Italian history," Enrico Letta of the opposition Democrats told the Financial Times. "Never before has a budget been passed in five days."
Italian banking sector shares plummeted further at the opening of trading on Tuesday and its benchmark 10-year bond yields hit a euro-era high of 6.09 per cent before markets recovered substantially on news that Mr Tremonti was returning early to Rome from Brussels for emergency talks with the opposition.
Moody's downgrades Ireland
Ireland on Tuesday night became the third eurozone country to see its credit rating downgraded to junk status.
Moody's, the US rating agency, cited the likelihood that Ireland would still need official help after its current bail-out programme ends in 2013.
Its downgrade follows that of Portugal in recent weeks and Greece last year.
Under media fire for spending too much time on dealing with his media empire's own financial woes, Mr Berlusconi also rushed back to Rome after cancelling a trip to watch his AC Milan football club in training.