MILAN, Italy — A growing number of European countries are being squeezed by a financial vise just days before a Greek election that could escalate the region's political and economic turmoil.
The rise of Italian and Spanish borrowing costs to alarming levels on Thursday heaped pressure on leaders to prevent Europe's debt crisis from engulfing its largest countries. No grand solution appears imminent.
German Chancellor Angela Merkel opposes solutions pushed by many experts that would increase costs for Berlin. Merkel has found herself isolated from the leaders of Spain, Italy and France, who want the 17 countries in the eurozone to move quickly to bind their governments' finances and debt.
Such action could take the form of jointly issued debt or continentwide guarantees on bank deposits. Either step would spread the risks that individual countries bear across the eurozone.
Italian Premier Mario Monti has agreed with French President Francois Hollande on the need for such measures. But Germany, which as Europe's largest economy bears most of the cost of bailouts, is reluctant to expose itself even more.
The proposed steps are expected to dominate talks at next week's summit of Group of 20 leaders in Mexico.
Compounding the debt crisis is the fear that has gripped European banks about lending to one another — a key element of a stable banking system.
"The European banking system is paralyzed," said Nicolas Veron, senior fellow at the Bruegel think tank in Brussels. "So many banks hold massive amounts of Spanish and Italian government bonds that are losing value. We no longer have a functioning interbank (lending) market in the eurozone."
Experts warn that the need for a solution is urgent and that European leaders must signal to investors soon that a consensus is forming around some plan. They note how fast fears about Spain have spread to Italy. Matters could worsen this weekend, when Greece holds elections that could determine whether that country sticks to the terms of its bailout.