The European Commission on Friday warned Italy\'s high borrowing costs could hit growth after bond yields surged to new records and France and Germany warned a blow-out on Italian debt could kill the euro. \"If the bond yields continue to be this high for long it will have a negative impact on the financial sector, on the real economy and therefore on economic growth,\" the EU\'s Economic Affairs Commissioner Olli Rehn said. Italy\'s rates were \"worrying,\" Rehn said. He also emphasised that high borrowing costs were a Europe-wide phenomenon saying: \"This is an increasingly systemic phenomenon which calls for stronger financial firewalls.\" He added however: \"I do not see the euro falling down, definitely.\" Rehn earlier upped the pressure on Prime Minister Mario Monti\'s new government, calling for \"an ambitious timeline\" on economic reforms. \"Italy is faced with formidable challenges,\" Rehn told Italian lawmakers. \"It would be essential to give strong signals to citizens and markets with a clear and ambitious roadmap for reform and an ambitious timeline,\" he said. In a bond auction, Italy raised 10 billion euros ($13.2 billion) but was forced to pay a rate of 6.504 percent on six-month bonds and of 7.814 percent on two-year bonds -- dangerous levels that could drive Italy to insolvency.  Italy needs to refinance about 400 billion euros in debt next year and has a debt of 1.9 trillion euros that has set off alarm bells around the world. At a summit in Strasbourg on Thursday with German Chancellor Angela Merkel and French President Nicolas Sarkozy, Monti\'s press office reported the two leaders had said a debt collapse in Italy would be \"the end of the euro.\" Merkel and Sarkozy \"said they were aware that a collapse of Italy would inevitably be the end of the euro, stalling the process of European integration with unpredictable consequences,\" it said in a statement on Friday. Italy\'s debt emergency has sparked concerns that it could break the eurozone and the Milan stock market plunged sharply after the bond sale, with the main FTSE Mib index plunging before recovering and closing 0.12 percent higher. Other European markets also recovered after struggling for much of the day. \"Europe is worrying investors more than ever,\" forex trader Saxo Bank said. Howard Wheeldon from brokers BGC Capital, said: \"International investors have chosen to ditch the euro in favour of more safe-haven currencies.\" Investors were fretting over the apparent failure of proposals to introduce eurobonds -- which would help weaker eurozone economies by spreading the risk -- and turn the European Central Bank into a lender of last resort. The Strasbourg mini-summit reinforced this concern by highlighting differences on finding a solution to the debt turmoil that is gripping Europe. Concerns about Europe\'s health were underscored on Wednesday when Germany drew bids of only 3.9 billion euros for a six-billion-euro bond auction. \"The recent developments in euro-area sovereign debt markets suggest that contagion is spreading from peripheral countries to the so-called core countries. Export markets could also turn out weaker than expected,\" Rehn said. Italy has been forced to agree to auditing of its books by the European Union and the International Monetary Fund and the European Commission has said more austerity measures may be needed to balance the budget by 2013. A first report from the monitoring mission was due on Tuesday, Rehn said. Italy, the eurozone\'s third-biggest economy after Germany and France, passed two budget austerity packages earlier this year when fears over its giant debt and sluggish economic reforms began rattling the markets. Technocrat Monti, himself a former top European Union commissioner and economics professor, has promised rapid action to slash the debt and boost growth and has wide public support but has yet to launch concrete reforms.