During an all-night European summit in June, Mario Monti, the Italian Prime Minister, gave German Chancellor Angela Merkel an unexpected ultimatum: He would block all deals until she agreed to take action against Italy's and Spain's rising borrowing costs, The Wall Street Journal reported. Ms. Merkel, who has held most of the euro's cards for the past two years, wasn't used to being put on the defensive. "This is not helpful, Mario," Ms. Merkel warned, according to people present.

Italy needs moral support from Germany but not its cash, Prime Minister Mario Monti said in an interview published on Sunday as German conservatives renewed calls for Greece to leave the euro zone, Reuters reported. The Italian leader also told weekly magazine Der Spiegel that he was concerned about growing anti-euro, anti-German and anti-European Union sentiment in the parliament in Rome.

Italian Prime Minister Mario Monti is stepping up pressure on Sicily to tighten its spending as the government seeks to stave off any prospect that the island, one of Italy's poorest regions, risks insolvency, The Wall Street Journal reported. Sicily must undergo a government-monitored austerity program aimed at restructuring the region's public administration—ranging from local hospitals to schools and waste-collection services—with the aim of cutting costs, Mr. Monti's office said in a statement on Tuesday.

As Prime Minister Mario Monti fights to protect Italy from the contagion driving up its borrowing costs to perilous levels, one region in particular has been in the spotlight: Sicily, which some fear has become “the Greece of Italy” and is at risk of defaulting on its high public debts, the International Herald Tribune reported. Mr.

Italian Prime Minister Mario Monti expressed serious concern on Tuesday over a possible default by Sicily, an autonomous region long criticized for its wasteful public administration and bloated government payroll, Reuters reported. Monti said in a statement there were "grave concerns" that the southern island could default and he said he had written to the governor Raffaele Lombardo seeking confirmation that he would resign by the end of the month.

The latest Italian bond downgrade had only modest impact on the market Friday but highlighted the risk of losing access to capital markets for the euro zone's third-largest economy, The Wall Street Journal reported. Government officials here insisted that Moody's Investors Service's two-notch downgrade early Friday was unjustified—a common refrain in Rome—and insisted they would convince investors that recent tough fiscal and economic measures would go on and bear fruit. The move was "completely unjustified and misleading," said Industry Minister Corrado Passera.

Italy said on Tuesday it may want to tap euro zone aid to ease its borrowing costs as finance ministers struggled to convince markets they are getting a grip on the bloc's debt crisis, which a top European Central Banker said could escalate, Reuters reported. Prime Minister Mario Monti, who is under intense market pressure to shape up his economy and avoid being drawn into the centre of the debt crisis, said Italy could be interested in tapping the euro zone's rescue fund for bond support.

Euro zone experts discussed a Finnish proposal for Spain and Italy to issue covered bonds to make their debt more attractive and to allow the euro zone's permanent bailout fund to bid at primary auctions of the two countries, officials said on Thursday, Reuters reported. The aim of the Eurogroup Working Group of deputy finance ministers and treasury officials is to find a way to lower financing costs for the two sovereigns that European Union leaders meeting in Brussels could discuss later.

Banca Monte dei Paschi di Siena SpA, the world’s oldest bank, will seek 3.4 billion euros ($4.3 billion) of government money to plug a capital gap uncovered by European regulators, Bloomberg Businessweek reported. “There were no alternatives,” Chief Executive Office Fabrizio Viola said Wednesday at a presentation in Siena. The bank expects to pay a higher interest rate on these securities than the 8.5 percent annual coupon for 2009 aid, Viola said. The government hasn’t set the bond’s terms yet.

Two holding companies of the embattled Ligresti family, which controls Italy's second-biggest insurer Fondiaria-SAI, were declared bankrupt on Thursday, muddying the waters of a plan by insurer Unipol to save its troubled peer, Reuters reported. A Milan court declared bankruptcy on the Sinergia and Imco holdings of the Ligrestis, rejecting a request from the firms' lawyers for more time to draw up a proper debt restructuring.