Germany rejected calls from allies and investors to do more tocounter market turmoil as Spain's financing costs surged andpressure mounted on Greek political leaders to submit writtencommitments to austerity measures.

Bond yields in France, Spain and Italy climbed as the absence ofprogress toward enacting a month-old comprehensive crisis-fightingpackage and a dispute over the central bank's role rattledinvestors. Spanish three-month bills were auctioned today at higheryields than Greece and Portugal.

“We don't have any new bazooka to pull out of the bag,” MichaelMeister, finance spokesman for Chancellor Angela Merkel's ChristianDemocratic bloc, said in Berlin today. “We see no alternative tothe policy we are following,” which sees debt cuts and keeping theEuropean Central Bank from becoming a lender of last resort, hesaid in an interview.

Germany is signaling resistance to stepping up Europe's responseas the debt crisis that began more than two years ago in Greecethreatens France, after snaring Ireland, Portugal, Italy and Spain.While the extra yield investors demand to lend to AAA-rated Francereached 200 basis points more than Germany on Nov. 17, the highestrisk premium since 1990, Meister said current policies will work ifgiven enough time.

“We need to tell markets very clearly — and this must be donesoon — that there is no other way forward than the one we'repursuing,” Meister said. Policy makers “must sit tight through theturbulence.”

The additional yield sought by investors for holding 10- yearFrench bonds instead of benchmark German bunds widened 8 basispoints to 162 basis points at 2:25 p.m. in Frankfurt. The euro rose0.3 percent to $1.3526.

In Spain, the newly elected People's Party called for a Europeanagreement to “save” the nation's debt, saying the country can'tafford 7 percent interest rates.

Spain sold three-month bills at an average yield of 5.11percent, more than twice the rate at the previous auction a monthago, and above the 4.63 percent for 13-week bills sold Nov. 15 byGreece, which received a bailout last year. Portugal paid 4.895percent on three-month bills the following day.

Maria Dolores de Cospedal, the deputy leader of Spain's People'sParty which ousted the ruling Socialists on Nov. 20, yesterdaycalled for a euro-region accord to “save and guarantee thesolvency” of Spain's 650 billion-euro ($881 billion) debt. Spaincan't afford to “continue financing itself at 7 percent,” she said,referring to the yield on 10-year debt that led Greece, Portugaland Ireland to seek EU aid.

Luxembourg's Jean-Claude Juncker, who leads the group ofeuro-area finance ministers, increased pressure on Antonis Samaras,head of Greece's New Democracy party, to drop his refusal to pledgewritten support for Greek budget cuts.

Juncker, who met Greek Prime Minister Lucas Papademos today,said Samaras' objection risked derailing the aid payment Greeceneeds to keep paying its bills.

“Would there be no cross-party agreement, the next disbursementwould not take place,” Juncker said.

Samaras says he has told officials from the EU, theInternational Monetary Fund and the European Central Bank that hehas already taken five actions that show his full commitment to theausterity program.

An all-night summit of European leaders in October failed to endthe turmoil after producing a pledge to write down Greece's debt,recapitalize banks and strengthen the region's rescue fund.

Underscoring discord among policy makers, ECB chief Mario Draghicriticized governments on Nov. 18 for failing to implement“long-standing decisions” to stem the crisis.

Merkel, who is calling for stronger enforcement of debt anddeficit rules underpinning the euro, signaled to ChristianDemocratic lawmakers at a closed caucus meeting late yesterday thatshe won't bend in her refusal to back joint euro-area bonds andwaver from last month's agreement, according to Volker Kauder, thebloc's floor leader.

“If markets think that the euro is about to break up, they'rewrong,” Meister said. “We must tell markets that we are ready todefend the currency, that it has a great future and will become thestrongest currency in the world.”

Global partners including the U.S. are urging Europeangovernments to stamp out the crisis that's threatening to pull the17-nation currency union apart, weighing on stocks and threateningto tip the world back into recession.

Euro-area leaders must reach “a momentous deal” toward fiscaland political union by mid-January to save the currency bloc,Credit Suisse said yesterday in a note to investors. “In short, thefate of the euro is about to be decided.”

Bloomberg