MADRID (AFP) ― Italian and Spanish sovereign debt risk premiums soared to euro-era record highs Tuesday, threatening to ensnare two major eurozone countries in an expanding debt crisis.

Spain’s prime minister delayed plans to leave on vacation and Italy’s finance minister met with the central bank and stock market authorities to grapple with the growing emergency.

The eurozone debt crisis has already claimed Greece, Ireland and Portugal, forcing them to seek bailouts from the European Union and International Monetary Fund.

There are growing fears Italy and Spain, the eurozone’s third- and fourth-biggest economies, could be next in line, developments that would dwarf previous bailouts and could undermine the euro itself.

Investors sold down Spanish and Italian bonds on concerns that their debt problems would only get worse as economic growth slows, as well as the precedent set by Greece’s latest rescue that will see bondholders share some of the burden.

The premium demanded for buying Spanish 10-year bonds over safe-bet German bonds surged to more than four percentage points ― 404 basis points ― the highest since the introduction of the euro in 1999.

Spanish premier Jose Luis Rodriguez Zapatero telephoned European Commission president Jose Manuel Barroso to discuss developments.

Spain also contacted Britain, France, Germany as well as Italy, where the risk premium shot to a record 384 basis points.

In Rome, Italian Finance Minister Giulio Tremonti held a meeting of the Financial Stability Safeguard Committee, which deplored that the country has become the object of “tensions arising from international uncertainties despite the progressive reduction of the public deficit.”

Italy adopted last month a plan to bring its public deficit next year back to the EU limit of 3 percent of GDP and achieve a balanced budget in 2014.

Tremonti was due to hold telephone talks with EU economic affairs commissioner Olli Rehn on Tuesday evening and meet with eurozone chief Jean-Claude Juncker in Luxembourg on Wednesday.

Credit default swaps ― insurance against a government defaulting on its bonds ― also rose to record levels for Spain and Italy, hitting 390 and 332 basis points respectively.

Meanwhile the yield on German government bonds fell below the country’s inflation rate for the first time since reunification in 1990, as investors sought a safe haven.

The yield on benchmark German 10-year government bonds fell to 2.395 percent, below the 2.4 percent July inflation rate, amid unprecedented demand.

Stocks in Madrid fell by 2.18 percent and 2.53 percent in Milan.

The European Commission said that debt rescue planning for Spain, Italy and Cyprus was not on the cards.

“The question of a program of emergency aid is certainly not on the table,” said Chantal Hughes, speaking for Economic Affairs Commissioner Olli Rehn in Brussels.

European Union President Herman Van Rompuy said it was ridiculous to lump Spain and Italy in the same basket as Greece.

“We cannot underline enough that the situation in Greece is unique and is not comparable to those in other eurozone countries,” Van Rompuy wrote in a commentary published in Le Monde newspaper.

“Current evaluations of risk on the markets do not correspond at all to fundamentals and it is ridiculous that ... these countries are considered the most likely to default on loan obligations,” he added.

A July 21 summit of eurozone policymakers, where they agreed alongside the private sector to pour another 159 billion euros ($226 billion) into Greece, was supposed to stop debt contagion spreading across Europe.

Berenberg Bank chief economist Holger Schmieding noted however that the private sector involvement in the latest Greek rescue has created a “dangerous precedent” that encourages bondholders to sell holdings in weak eurozone members.

“The lesson for investors is clear: if doubts emerge of the solvency of a eurozone member, it is better to sell early...,” he wrote in a report.

He expressed confidence the eurozone would contain the crisis in the end.

“But to do so reliably, the ECB ought to abandon its current passive role and signal clearly that it would resume bond purchases if need be.”

The European Central Bank helped defuse a crisis last year when it reversed its long-held policy and began buying bonds of struggling eurozone members on the secondary market, but has not made any purchases in recent months.