* Italy, Spain bond yields hit 14-year highs, stocks wilt

* Slowing growth outlook piles pressure on euro zone  

* Italy holds emergency talks, Tremonti to meet EU aides

* Spain says key EU ministries in contact on markets

ROME - Financial market pressure on Italy intensified on Tuesday, sucking Europe's second biggest debtor nation deeper into the euro area danger zone and prompting emergency consultations in Rome and among European capitals.

Italian and Spanish bond yields hit their highest levels in 14 years, with five-year Italian yields reaching the same level as Spain's in a sign Rome is overtaking Madrid as a key focus of investors' concern about debt sustainability.  

Italy's stock index fell 2.5 percent to its lowest in more than 27 months, dragged down by banks that have heavy exposure to Italian debt. European shares hit a 9-month low amid worries that slowing economic growth will make it even harder to overcome the euro zone's debt troubles.

"The fear of the market is that the world is going into recession again ... and in the euro zone the peripheral markets are the ones that will suffer most," said Alessandro Giansanti, strategist at ING in Amsterdam.  

Economy Minister Giulio Tremonti chaired a meeting of the Financial Stability Committee -- made up of representatives of the government, the Bank of Italy, market regulator Consob and insurance authority ISVAP -- a day before Prime Minister Silvio Berlusconi is due to break his silence and address parliament.

In a statement after the meeting, the committee said Italy's financial system remained solid thanks to recent action to strengthen the capital base and liquidity reserves of Italian banks, but it would continue to monitor developments.

Spanish Prime Minister Jose Luis Rodriguez Zapatero postponed his departure for vacation to monitor economic developments after the risk premium on his country's debt over benchmark German bonds rose to a euro lifetime high of more than 4.0 percentage points.  

Jean-Claude Juncker, who chairs the Eurogroup of euro zone finance ministers, said he would meet Tremonti in Luxembourg on Wednesday, as it became increasingly clear that a second Greek bailout agreed on July 21 had brought no respite for the currency bloc. The European Commission said monetary affairs chief Olli Rehn, who is on vacation in Finland, would speak to Tremonti later on Wednesday.  

Spain's economy ministry told Reuters it was in contact with fellow European governments -- particularly Germany, Italy and France -- about the situation in the markets.

Zapatero last week called an early general election for November 20. The conservative opposition Popular Party has a 14-point lead over his Socialists in opinion polls, but any narrowing towards an indecisive result could spook investors.

Elsewhere in Europe, leading policymakers are on summer holiday after agreeing last month on a second financial rescue for Greece, the worst hit euro zone debtor, that was meant to buy calm in the markets at least until September.  

VERBAL SUPPORT

International bodies offered Italy and Spain verbal support.

The European Commission said both Rome and Madrid were taking necessary action to keep their economies on track and "we are confident in their abilities".

The head of the Organisation for Economic Cooperation and Development, a rich nations' intergovernmental think-tank, told Reuters that Italy had its public finances under control and was taking the right decisions to reduce its deficit.

"Therefore it does not need foreign savings to finance its deficits and therefore it is OK," OECD Secretary-General Angel Gurria said in an interview in Athens, noting that Italy had a high domestic savings rate.  

Italy is in the firing line partly because, at 120 percent of economic output, it has the highest debt-to-gross-domestic-product ratio of any euro zone nation except Greece, which is nearing 160 percent.

But political instability in Rome's centre-right coalition has whipped up market concern, with Berlusconi on trial for alleged tax evasion and sexual relations with a minor, and Tremonti under fire over his use of an apartment owned by an aide under investigation for alleged corruption.

Bank of Italy Governor Mario Draghi, due to take over as head of the European Central Bank in November, met Italian President Giorgio Napolitano for the second time in a week in a sign of the gravity of the financial situation.

Amid the turmoil, Italian market regulator Consob requested information from Deutsche Bank on a recent massive reduction of its holdings of Italian bonds, according to the economy ministry.  

Deutsche's second quarter results showed it had cut its net Italian sovereign exposure from 8 billion euros at the end of 2010 to 997 million euros by the start of July, the ministry said in a statement.

The euro zone and the International Monetary Fund have already had to grant bailouts to Greece, Ireland and Portugal. Tiny Cyprus may be next in line due to its banks' exposure to Greek debt, and the economic fallout from an explosion last month that destroyed its sole electrical power station.

Brussels sought to counter reports that Italy may not contribute to the next round of aid for Greece because its own borrowing costs are now well above the 3.5 percent rate at which the money will be lent on to Athens.

"All euro zone member states are committed to paying into the next tranche of aid for Greece," European Commission spokeswoman Chantal Hughes told a news briefing, citing Italy and Spain.

"However, if any country is faced with higher funding costs at that point in time, when the next tranche of aid would be funded, there is a mechanism in place to ensure that they are compensated for it," she said.  

Reuters reported last week that Italy was considering "stepping out" of funding the next Greek tranche or using the compensation mechanism.

The OECD said the latest European rescue deal for Greece would only slightly reduce the country's debt and it would take a generation to cut it to more sustainable levels.

However, it said the extra official financial support agreed and maturity extensions for public loans and private sector bonds would give Greece the time needed to implement fundamental fiscal and structural reforms.  

"We will support the Greek government for a full generation, which is what it is going to take to get those numbers of lower debt-to-GDP," Gurria said.

Many economists say the EU deal was insufficient and Greece will need a hard restructuring to halve its debt ratio to about 80 percent of GDP to make it sustainable.

(Additional reporting by Ingrid Melander in Athens, William James in London, Carlos Ruano and Sarah Morris in Madrid and Justyna Pawlak and Robert-Jan Bartunek in Brussels; writing by Paul Taylor; editing by Janet McBride/Mike Peacock/Ron Askew)