Evening Edition

Bonds issued by Greece and Italy fell, and the cost of insuring against default by Italy and France, as indicated by the market for credit default swap (CDS) instruments, rose sharply.

German stocks were down by nearly 6.0 percent, while in London, the FTSE index fell by 3.06 percent to 5,129.97 points.

In a speech, Jean-Claude Trichet implored eurozone nations to tighten up the monitoring of economies, imagining a “confederal” management of eurozone finances.

Speaking later, Mario Draghi, Trichet’s successor at the ECB in two months time, asked for broad changes to the Lisbon Treaty and said short-term measures taken to stave off the debt crisis were clearly insufficient.

Alfredo Perez Rubalcaba of the governing Socialist Party confirmed his electoral programme included new taxes, one for banks and the other for the wealthiest section of the population.

The first would bring in more than 1.0 billion euros ($1.4 billion) and the second 1.4 billion euros ($2.0 billion), or “a total of 2.5 billion euros and all will go towards creating jobs,” he told Cadena Ser radio.

“Prospects for the financial sector overall … are rather limited,” the CEO of Germany’s top bank said on Monday. “The outlook for the future growth of revenues is limited by both the current situation and structurally.”

Ackermann was speaking at Frankfurt’s annual Banks in Transition conference against a backdrop of gloom in the capital markets, where fears some euro zone countries could default on their debts have sent investors scurrying for shelter.

Finance ministers and central bank governors of the United States, Canada, Japan, Germany, France, Italy and Britain (G7) meet on Friday in the French port of Marseilles to discuss what action to take to prop up the slowing global economy.

“The main issue will be the slowdown in the global economy and what is the best way to tackle that,” a G7 official with knowledge of the preparations for the meeting said.

“No one can underestimate the alarming signal from today’s surge in the differential between the prices of Italian public debt instruments and those of Germany,” Napolitano said in a statement.

“It is a sign of the persistent difficulty in regaining trust as is urgently and indispensably required,” he said, adding that he urged all parties not to block measures needed to restore credibility.

The association’s president, Patrick Odier, made the comments after newspapers reported on Sunday the United States had given an ultimatum to Switzerland, saying Credit Suisse and nine other banks could face charges unless detailed information on U.S. tax evaders using Swiss accounts was handed over this week.

“There cannot be an ultimatum. Friendly states must have a will to negotiate,” Odier told a news conference.

At the heart of their problems is a steady move by pension plans in the United States, euro zone, Japan and the UK to cut exposure to risk after the financial crisis.

But this “de-risking” may end up depressing their long-term returns from stock market investment and challenge the conventional wisdom that shares generate higher returns than bonds.

On-off talks involving tribal elders from Bani Walid, south of Tripoli, and a fog of contradictory messages in recent days reflect the complexities of dismantling the remnants of Gaddafi’s 42-year rule and building a new political system.

At a military checkpoint some 60 km (40 miles) north of the town on the road to the capital, Abdallah Kanshil, who is running talks for the interim government, told journalists a peaceful handover was coming soon. Nevertheless, a dozen vehicles carrying NTC fighters arrived at the checkpoint.

Ryan Crocker, a career diplomat who was ambassador in Iraq, also warned the United States would have to spend billions more in the coming years to bolster Afghanistan’s government and security forces as its own troops prepare to return home.

“What we have to do is I think demonstrate the strategic patience that is necessary to win a long war,” he told Reuters, in an interview ahead of the 10th anniversary of the attacks.

Any troubles in the world’s largest economy cast a long shadow over the markets, and a report Friday that the U.S. economy failed to add any new jobs in August caused European and Asian stock markets to sink sharply Monday.

But the news from Europe was also discouraging. Wall Street, which was closed Monday due to the Labor Day holiday, braced for losses Tuesday after the yields in so-called peripheral eurozone countries – Greece, Italy and Spain – rose sharply against those of Germany, whose bonds are widely considered a safe haven.

The standoff came as rebel leaders in Tripoli said Libya’s transition to democratic rule would begin with a “declaration of liberation” that was unlikely to come before Gadhafi’s forces last strongholds were defeated and the fugitive former dictator had been captured.

The declaration would mark the start of an eight-month deadline for Libya’s transitional council to arrange the vote for a national assembly, and eventually to a constitution and general elections.

In a preview of the jobs speech he will deliver on Thursday to Congress, Obama said there are numerous roads and bridges that need rebuilding in the U.S., and over 1 million unemployed construction workers who are available to build them.

Citing massive federal budget deficits, Republicans have expressed opposition to spending vast new sums on jobs programs. But Obama said that with widespread suffering, “the time for Washington games is over” and lawmakers must move quickly to create jobs.

If enacted, the chamber estimates the steps could encourage corporations to spend much of the nearly $2 trillion dollars that have accumulated on their balance sheets and generate more than 6 million jobs by 2013, and even more in ensuing years.

The chamber is looking to influence job creation proposals just days after a bleak government employment report showed no net job growth in August and four days before President Barack Obama delivers an economic speech to a joint session of Congress. Chamber proposals on trade and infrastructure are sure to overlap with some Obama administration initiatives. Others, such as the corporate tax breaks and oil drilling, are more certain to win Republican support.