video transcript

The streets of Madrid packed with sheep - this farmers' protest against urban development is an annual ritual. And nearby another ritual with slightly higher stakes was also taking place. Italian Prime Minister Mario Monti met his Spanish counterpart Mariano Rajoy amid a growing divide over Europe's new bailout strategy. Monti wants Spain to seek aid in order to lower both countries borrowing costs but Rajoy is digging in his heels. (SOUNDBITE) (Spanish) SPANISH PRIME MINISTER MARIANO RAJOY SAYING: "Well at this time the Spanish government hasn't asked for it and it has not asked because it understands it isn't essential at this moment in order to defend the general interests of Spain." The meeting comes as the eye of the euro zone storm moves to Italy. At the weekend former Italian Prime Minister Silvio Berlusconi threatened to bring down Monti's government. His outburst followed his jail sentence for tax fraud. The case led to his political downfall last year at the height of the debt crisis. It threatened to push Italy's public debt out of control. David Buik is Senior Strategist at BGC Partners. (SOUNDBITE) (English) SENIOR STRATEGIST AT BGC, DAVID BUIK, SAYING: "There is a feeling in Europe that Italy's banks are in a similar state of dis-repair. I think Italy is a different country, well I am stating the obvious but there is enormous wealth in the northern part of Italy, huge wealth and obviously it is the most fragmented country politically imaginable." Regional elections in Sicily will provide clues to the impact of Berlusconi's threat. The votes were still being counted on Monday but turnout was low suggesting disillusioned voters. Markets too reacted nervously - Italian borrowing costs rose for the first time in weeks. It seems the summer boost from the ECB's pledge to buy unlimited quantities of bonds is beginning to fade.