Former Italian Prime Minister Silvio Berlusconi has unleashed a bitter political debate ahead of a crucial meeting of European leaders in Rome, saying there may be "advantages" in Italy abandoning the euro.

"I do not believe it is a blasphemy to consider leaving the euro, we can think about proceeding with a competitive devaluation," he said.

"While it would certainly not be desirable, it would also have advantages," said the billionaire, one of Italy's wealthiest men who heads a vast media and property empire.

In the wake of those comments, the leaders of Germany, France, Italy and Spain were trying to find common ground in Rome on Friday to restore confidence in the euro zone ahead of a full EU summit next week, which Italy's prime minister called a defining moment.

Dangerously high borrowing costs for Spain and Italy have eased a little on market hopes for policy initiatives at the Brussels summit that begins June 28. If it falls short, both countries may be pushed closer to eventually needing sovereign bailouts.

Without a successful summit, "there would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries," Italy's Mario Monti said in an interview with European newspapers.

The European leaders are expected to go over an Italian proposal to launch two rescue funds to buy Spanish and Italian debts.

Spain, which is in its second recession since 2009, has the highest unemployment rate in the EU, while unease among investors over Italy's debt levels continuously builds up.

Berlusconi's suggestion has prompted two days of harsh criticism from politicians. Corrado Passera, minister for economic development, stressed he totally opposed the idea.

"It is a proposal that has no common sense," Passera told Italian reporters.

Giorgio Squinzi, president of Italy's largest employer organization Confindustria, also urged to defend the euro at all costs.

"The euro will be defended until the end and must be done so with determination to support it across all of Europe," Squinzi said on the sidelines of an economic conference in the northern city of Verona.

The political storm erupted as the euro came under renewed pressure after the Spanish bond auction saw yields reaching a 16-year high.

The euro traded at $1.27 late Thursday after falling to 1.2573 on speculation of an imminent Moody's downgrade of 17 international banks.

Squinzi stressed the need for a European Central Bank "with the real powers of a central bank."

"I find it incomprehensible that you can give support to the Monti government on one hand and consider an eventual exit from the euro without causing great damage to Italy," said Gianfranco Fini, president of the lower house of Parliament and a former Berlusconi ally.

Meanwhile, Monti on Thursday reached an agreement with main political parties to back a controversial labor reform package in the parliament before next week's European Union summit in Brussels on the eurozone crisis.

Xinhua - Reuters