Italian Prime Minister Mario Monti sought reinforcement for the euro zone's bailout fund and pledged new efforts to boost the economy after a disappointing bond auction on Thursday underlined the threat to the country's shaky public finances. Investors demanded a yield of nearly 7 percent on 10-year paper at the auction of medium- and long-term bonds, down from the record highs seen last month but still unsustainable given the 450 billion euros that Italy needs to raise through debt issuance in 2012.

An unprecedented European Central Bank injection last week of nearly half a trillion euros of cheap funding for banks eased pressure at a short-term Italian debt auction on Wednesday, but longer-dated bonds still pose a challenge. Monti put a brave face on the auction result, which analysts described as "slightly positive" or "average" at best. "Auctions held yesterday and today went rather well, this is encouraging but the financial turbulence absolutely isn't over," Monti said during a traditional end-year press conference. Italy, the euro zone's third largest economy, remains at the centre of the debt crisis that began in Greece two years ago and its borrowing needs could overwhelm the bloc's financial defences if it were forced to seek an international bailout.