FRANKFURT, Germany (AP) ? The leaders of Germany and France are welcoming plans by Italy and Spain to cut their budget deficits and improve their competitiveness, and are urging "complete and speedy" implementation.
In a joint statement Sunday, Angela Merkel and Nicolas Sarkozy underscored their commitment to "fully implement" decisions taken by a summit last month to give the eurozone rescue fund expanded powers ? allowing it to buy bonds on secondary markets.
The leaders said they stress the importance of the fact that "parliamentary approval will be obtained swiftly by the end of September in their two countries."
Merkel and Sarkozy welcomed the plans of Italy and Spain and said that Rome's pledge to balance its budget a year before its previous schedule "is of fundamental importance."
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
FRANKFURT, Germany (AP) ? The European Central Bank is holding an emergency telephone conference Sunday on how to fend off financial collapse in Italy while officials from rich and developing countries discussed ways to stabilize markets when they reopen after Friday's U.S credit-rating downgrade.
A eurozone official told The Associated Press that central bank leaders were to discuss possible purchases of Italian government bonds ? a risky move but one that could help drive down bond interest yields that are threatening the heavily indebted country's finances.
The official declined to be identified without authorization to discuss the meeting. A spokeswoman for the ECB declined to comment.
European officials are trying to keep Italy from being dragged into the same kind of interest-rate death spiral that forced Greece, Ireland and Portugal to seek international bailout loans after they could no longer borrow at affordable rates.
Officials from world's 20 leading economies on Sunday also discussed the stability of financial markets after the historic U.S. credit downgrade rattled investors already worried about European debt crises.
Deputies from the Group of 20 advanced and emerging economies talked by telephone about proposals to minimize market shocks following the downgrade, South Korea's central bank said.
Japan's Kyodo News agency reported Sunday that G-7 deputy finance ministers had agreed on a conference call among the higher-level ministers, who are likely to discuss the U.S. downgrade as well as the eurozone sovereign debt concerns.
The G-7 includes Britain, Canada, France, Germany, Italy, the U.S. and Japan, while the G-20 includes those countries as well as large emerging economies such as China, Brazil, Russia and India.
ECB President Jean-Claude Trichet said last week that the bank was reviving its bond-buying program after leaving it dormant for four months, and the head of Belgium's central bank said it bought Irish and Portuguese bonds but not those from Spain and Italy, implying those countries had to do more to fix their finances first.
Responding to market pressure, Italian Prime Minister Silvio Berlusconi on Friday promised to balance the country's budget by 2013, a year early, and to bring forward other reforms such as including an amendment in the constitution requiring the government to balance its budget.
Italy's bond yields have risen from under 4 percent late last year to over 6 percent on Friday, a potentially serious burden for the government's finances.
The government has debt equivalent to 120 percent of economic output, the second highest in the eurozone behind Greece, and weak prospects for economic growth that would help pay debt.
Sunday's phone meeting comes just hours before the opening of financial markets in Asia, after Friday's downgrade of the United States' credit rating from AAA to AA plus by ratings agency Standard & Poor's has led to fears of more stock market plunges.
Last week already saw markets around the world deep in the red amid fears the global economy may be weakening and the uncertainty created by Europe's sovereign debt crisis.
In a sign of early fallout, Middle East markets tumbled Sunday on the first day of business after the downgrade.
Middle East markets, open Sunday through Thursday, were the first to react to the downgrade. Egypt's benchmark EGX30 index fell more than 4 percent, and other Gulf markets also were sharply lower.
Israel's Tel Aviv Stock Exchange delayed the start of the week's first session after pre-market trade showed the benchmark index dropping more than 6 percent because of concerns over the U.S. debt rating cut. Exchange spokeswoman Idit Yaaron said the start was pushed back by 45 minutes "so market players will have time to react logically and not under pressure."
Israel's benchmark TA-25 index plunged 7 percent to close at 1,074 points.
U.S. markets and others reopen Monday but have had rough patches recently. The Dow Jones industrial average dropped 512 points Thursday, its worst performance since the financial crisis of 2008, and regained only a fraction of that drop Friday.
Many economists see the world's big central banks as the last line of defense at this moment in the crisis, after policymakers in Europe and the U.S. have failed to agree on the kind of shock-and-awe moves that many investors demand.
Investors have also been calling on the U.S. Federal Reserve to start pumping money into the American economy again to help underpin the slowing economic recovery.
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Yamaguchi reported from Tokyo. Associated Press writers Kelly Olsen in Seoul, South Korea; Adam Schreck in Dubai; and Christopher Bodeen in Beijing contributed to this report.
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