In a cry for help, Italy and Spain joined forces, blocking a key EU deal on growth failing swift pledges from their partners to fight off market pressure threatening their economies.

The strong-arm tactics spoiled a crucial two-day summit set to end today with a deal on a growth pact aimed at breathing life into Europe’s flagging economies and sealing splits between the bloc’s 27 nations.

While the European Union heads of state and government announced an agreement to inject €120 billion ($150 billion) into cross-border infrastructure projects that would create much-needed jobs, they were unable to finalise a so-called “growth compact” due to the stand by Spain and Italy yesterday.

Madrid and Rome have seen their borrowing costs soar as markets lose confidence in their ability to reduce huge deficits.

“There are two countries that are very keen to ensure there is agreement on long-term measures and short-term measures,” the EU President, Mr Herman Van Rompuy, told a news conference after seven hours of talks.

“I wouldn’t say there is a blockage, discussions are ongoing,” he said.

Officials from both countries said the Spanish Prime Minister, Mr Mariano Rajoy, and his Italian counterpart, Mr Mario Monti, had tied backing for a growth pact to their demands for short-term measures to bring relief on the bond markets.

“We have no reservations on the substance, but we want it to be part of a larger solution, the long-term must be linked to the short term,” an Italian official said.

Direct intervention by the Euro Zone rescue fund in bond markets was the focus of negotiations among Euro Zone treasury officials on the sidelines of the summit.

“We are in favour (of the growth pact), it is necessary, but it is not urgent. What is urgent and more important for us is the sustainability of the debt,” a Spanish official said.

The growth pact was expected to sail through the summit after the leaders of Germany, France, Italy and Spain announced a tentative deal on the issue last week.

But with investors charging ever higher interest rates to lend to Rome and Madrid, Mr Monti, backed by France and Spain, has called for the Euro Zone’s rescue fund to buy his country’s bonds in order to reduce their borrowing costs.

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