AFP

MILAN ITALY was forced to pay higher rates in a bond auction that failed to reach its maximum target on Thursday as Rome sought to defuse a row with Madrid over who to blame for a return of investor jitters.

The Italian Treasury had hoped to raise up to 5.0 billion euros ($6.6 billion) but only took 4.9 billion, and the rate on the three-year bonds sold rose to 3.89 percent compared with 2.76 percent in a similar issue last month.

“We made the choice not to take all of the demand because we do not have the urgency to raise funding at rates that we do not believe are right,” Vittorio Grilli, a junior economy minister, told reporters after the auction.

Italian Prime Minister Mario Monti meanwhile sought to defuse a row with the Spanish government over comments attributed to him by the Italian daily Corriere della Sera earlier this week in which he appeared to criticise Spain.

Monti called his Spanish counterpart Mariano Rajoy to deny ever making the comments, Rajoy said, a day after the Spaniard urged fellow European leaders to be “prudent” when talking about Spain’s economic woes.

The Italian government also issued a statement saying “in these days it has not commented either directly or indirectly the causes” of the market jitters.

The Italian leader was already upbraided last month for criticising Spain.

Grilli also tried to smooth over the dispute saying: “We absolutely do not want to talk about Spain. In this moment of great fragility across Europe we are all tied together and it’s in everyone’s interests for others to be successful.” The European Commission in Brussels meanwhile urged eurozone leaders to work together, with a spokesman saying: “We want the 17 euro area member states to move forward together to preserve their common good, the euro.” “A problem with the macro-economic stability and financial stability of one of the 17 eurozone states affects the other 16,” he said, adding: “What we want today is (for) collective solutions and consensual actions to be put in place.”