ROME (AP) ― Italy’s borrowing costs fell for a second day Thursday but the country’s new premier said his government has more to do before it convinces financial markets it can manage the heavy debts that have made it the focus of the eurozone crisis.

Mario Monti said he was encouraged by the bond auctions at which the interest costs paid out by Italy to bond investors eased.

He said his government of technocrats, in office for just a month and a half following the resignation of Silvio Berlusconi, was preparing a package of measures to get the Italian economy moving again, including efforts to boost competition and liberalize the labor market.

“Yesterday and today went pretty well, this is encouraging,” Monti said at a news conference after the Italian treasury tapped investors for around 7 billion euro ($9.2 billion). “But we absolutely don’t consider the market turbulence to be over.”

The amount raised, however, was less than the 8.5 billion euro ($11 billion) maximum sought and contributed to ongoing weakness in the euro, which fell to a 15-month low against the dollar of $1.2866.

The most keenly awaited result from Thursday’s batch of auctions was the 2.5 billion euro sale of ten-year bonds at an average yield of 6.98 percent. That’s lower than the record 7.56 percent it had to pay at an equivalent auction last month, when investor concerns over the ability of the country to service its massive debts became particularly acute.

However, the country’s borrowing rate on the key 10-year bond remains uncomfortably close to the 7 percent level widely considered to be unsustainable in the long run. Greece, Ireland and Portugal all had to request financial bailouts after their 10-year bond yields pushed above 7 percent. In the secondary markets, Italy’s yield continues to hover around the 7 percent mark.

“Investors are still waiting for more progress on the reform front to ensure Italy can improve its muted growth and productivity performance since the adoption of the euro,” said Raj Badiani, a senior economist at IHS Global Insight.

Monti spent much of his press conference talking about the need to get Italy growing again ― it has stagnated this year and is widely anticipated to fall back into recession sometime in 2012.

He said the lower bond yields could give the government “space” to try to mitigate some of the harsh austerity measures that parliament passed last week, that included tax hikes and reforms to the pension system.

Monti outlined a new phase of reforms, focusing more on boosting economic growth, such as increasing competitiveness and flexibility in Italy’s labor market and cracking down on people who avoid or underestimate their property taxes. He said the first phase of measures would be ready by a Jan. 23 EU meeting.

Italy is at the focal point of the eurozone’s struggle to deal with a crisis over heavy levels of government debt in a number of the 17 countries that use the single currency. Fears of default on those debts mean that bond investors demand ever higher interest. If a country can no longer borrow affordably to pay off bonds that are maturing, it winds up needing a bailout or defaulting.

Markets had grown fearful over the past few months over Italy’s massive debt burden of 1.9 trillion euro and Italy’s ability to continue dealing with it. Next year alone, the eurozone’s third largest economy has some 330 billion euro of debt to refinance.

That means Italy has far to go before it convinces markets it will avoid a disastrous default that could cause another banking crisis and sink the European and global economies.

“You lose market confidence easily; you get it back with constant and continuous efforts,” Monti quipped, quoting Italy’s central bank chief.

Italy also sold 2.54 billion euro of 3 year bonds at an average interest rate of 5.62 percent, far lower than the 7.89 percent rate it had to pay last month. It also raised 803 million euro in the 7-year auction at a rate of 7.42 percent and 1.18 billion euro in nine-year bonds at a yield of 6.7 percent.

Thursday’s results come a day after Italy raised 10.7 billion euro in a pair of auctions, again at sharply lower rates than those it was forced to pay just a month ago.

The sharp decline in Italy’s borrowing costs over the past couple of days suggests that commercial banks from the 17 countries that use the euro may have diverted some money they tapped from emergency loans from the European Central Bank last week to buy the bonds of heavily indebted governments.

It may also suggest rising investor confidence in Italy’s recent efforts to reduce its long-term debt through tax increases, pension changes and spending cuts.