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Italy has passed austerity measures and is on a structural reform course that Premier Mario Monti claims should bring down Italy’s high bond yields, which he says are no longer warranted.

Monti took over in November after Premier Silvio Berlusconi stepped down under market and political pressure.

The former EU commissioner said Thursday that Europe needs to focus not only on fiscal discipline, which is to be enshrined in a fiscal compact still being negotiated, but also coordinate measures to promote growth.

Monti said the EU goal of reducing total debt to 60 percent of GDP in 20 years was “severe, but doable.”

Italy’s debt currently stands at 120 percent of GDP. Spain’s is at 66 percent.

Spain’s auction was the first since the conservative Popular Party took office last month after its landslide election win Nov. 20. It came a day after Parliament approved the government’s first austerity measures, a euro15 billion ($19.1 billion) package aimed at reining in the swollen deficit.

Spain has a 21.5 percent unemployment rate and its economy is expected to fall back into recession.

The Treasury sold euro4.27 billion in three-year paper with an average interest rate of 3.38 percent. A Dec. 15 three-year bond sale had a 4.02 percent rate. Yields were also down on two other bond types sold.

Marc Ostwald, strategist for Monument Securities described the demand as “very impressive” and said the sale indicated a warm welcome for the government’s efforts to quickly bring the deficit under control.

Spain’s borrowing costs shot up last year but have eased in auctions since the election.

The country has pledged to slash its deficit from 11.2 percent of GDP in 2009 to within the European Union limit of 3 percent by 2013.

Meanwhile, crucial Greek talks continued between the government and its private investors to reach a deal on a bond swap that would reduce the country’s debt load and is an integral part of its second bailout package.

Finance chief Evangelos Venizelos said Wednesday the negotiations had “advanced and are now at a very good point.”

Barry reported from Milan. Daniel Woolls in Madrid contributed to this report.