Fears mounted Wednesday that Europe’s debt crisis is reaching a critical tipping point, spreading from Greece, Ireland and Portugal to the larger economies of Italy and Spain.

The deepening woes raised the prospect of a crisis that would be almost as calamitous for the global economy as the one just avoided in Washington.

Investors drove borrowing costs for Italy and Spain to 14-year highs, fueling sharp stock market drops in London, Frankfurt, Paris, Milan and Madrid. Though Italian and Spanish bonds later rebounded, borrowing rates for both nations remained dangerously high, at more than 6 percent — and closing in on the 7 percent threshold that eventually triggered bailout talks with Greece, Ireland and Portugal.

On Thursday, the head of the European Union’s executive called on eurozone leaders to consider further changes to the region’s bailout fund, including increasing its size, the Associated Press reported.

In a letter to leaders, European Commission President Jose Manuel Barroso urged “a rapid reassessment of all elements related to” the eurozone’s bailout fund to make sure it can effectively stop the debt crisis.

Also Thursday, the head of the European Central Bank, Jean-Claude Trichet, hinted that the bank might again buy bonds of Europe’s most financially troubled governments in an attempt to calm markets, the AP reported.

The bank also offered more emergency credit to banks, and indicated there was a greater chance that an interest rate hike once expected in October would be put off.

Concern on Wednesday focused on Italy, whose sheer size — it is the world’s seventh-largest economy — makes it potentially too big to bail out and would require radical new steps from already reluctant European leaders and the European Central Bank to prevent a full-blown crisis there. The day also saw volatile trading in the bonds of Belgium and even France as fears grew that Europe may be forced into a costly rethink of how to preserve its common currency, the euro.

The trouble in Italy and Spain came amid more signs that European economies are rapidly slowing as nations across the continent tighten their fiscal belts to combat high debt loads. At the same time, economists warn, the spending cuts in the U.S. debt agreement could undercut the anemic U.S. economic recovery. Concerns about slower growth are already rattling global markets and raising the prospect that European countries will have an even harder time than anticipated restoring themselves to health.

Underscoring the urgency, Italy’s embattled prime minister, Silvio Berlusconi, delivered an emergency address to Parliament, rejecting renewed calls for his resignation while defiantly warning that speculators are wrong to bet against Italy. He also seemed to draw a line in the sand with investors demanding more cuts, revealing no new austerity plans and calling economic growth the country’s best defense.

“We have sound economic fundamentals,” he said.

The anxiety spread as a broad plan by European leaders reached last month in an attempt to finally contain the region’s nearly two-year-old debt crisis was failing to calm investors. Led by Germany and France, the 17 nations that use the euro agreed to again shore up near-bankrupt Greece while offering new pledges to aid member countries in crisis.

But they did not promise anything near the level of funds needed to cope with financial breakdowns in Rome and Madrid, and the agreement, economists warned, lacked key details. The plan also requires ratification in European capitals — something that could be held up by the same kind of political polarization that almost triggered a U.S. default.

“Markets need to be assured that policymakers are aware of the problems and are being proactive instead of reactive,” said Raj Badiani, Europe economic analyst with IHS Global Insight. “What they need is more decisive action.”

If the crisis is not contained, analysts fear profound repercussions for the global economy, up to and possibly including a fresh worldwide financial crisis. A full-blown debt crisis in Italy and Spain would hit large European banks hardest, but it could also dry up lending between financial institutions worldwide in a manner similar to the global credit crunch that started in the United States in 2008.

U.S. banks and investment funds are also more exposed to Italy and Spain than they are, for instance, to tiny Greece. Though U.S. holdings in Italian and Spanish debt amount to $36.7 billion and $47.1 billion, respectively, indirect holdings through de­rivatives and other financial contracts total an additional $232 billion and $131 billion.

Should Italy’s and Spain’s borrowing rates continue jumping, both nations could effectively be priced out of private markets, leaving the Europeans with limited options. Though Europe, led by Germany, has bailed out Greece, Ireland and Portugal, analysts believe rescues for Italy and Spain would be politically untenable. Outrage is already growing among German, Dutch and Finnish voters in particular over current bailouts. And in a worst-case scenario, Italy alone would need $1.2 trillion to cover its borrowing for the next three years — or six times the amount for Greece.

Instead, analysts believe that the European Central Bank would need to step in with a massive program to buy up Italian and Spanish debt to drive down their borrowing rates, while extending more liquidity to big banks in both countries. But if such a program went on too long, it could risk undermining the euro and triggering a dangerous bout of inflation.

On Wednesday, European leaders appeared mostly frustrated with investors, who they insisted were overreacting.

“Developments in the sovereign bond markets of Italy and Spain are a cause of deep concern,” Barroso told reporters. “These developments are clearly unwarranted on the basis of economic and budgetary fundamentals in these two member states and the steps that they are taking to reinforce those fundamentals.”

Berlusconi also appeared unbowed, saying the markets were grossly underestimating Italy’s fiscal health. In fact, though the country’s debt burden is massive — with $2.2 trillion in debt, Italy is deeper in the red than the United States compared with the size of its economic output — its annual budget deficit is running at a relatively modest 4 percent. Unlike Greece, it also boasts a massive industrial base with heavy manufacturing.

But investors have nevertheless tired in recent months of trusting indebted nations to pay their bills, and with signs of slower growth in Europe, some fear that Italy may not be able to meet its budget targets. Some critics also view a recently approved austerity plan there as being too little, too late. Berlusconi offered them scant reason for more comfort, providing no outline for any additional cost cutting.

The cloud over Italy and Spain also reflects political uncertainty. Spain, where a backlash to austerity is growing, will hold early elections in November. In Italy, the 74-year-old Berlusconi is still embroiled in sex and financial scandals. He has also publicly warred with his finance minister, Giulio Tremonti, a man who is seen as Italy’s economic compass but who is battling a fresh scandal over his financial links to a top aide mired in a corruption probe.

“Berlusconi is more interested in his bunga-bunga parties than his bond market,” said Louise Cooper, a markets analyst at BGC Partners in London. “Having a very public row with your finance minister is just extraordinary. But this is what you come to expect from the man.” The latest data raise concern “that euro-zone growth is rapidly ebbing and in real danger of grinding to a halt,” said Howard Archer, an economist with IHS Global.

At the same time, the latest sign that growth is slowing across Europe emerged Wednesday, with data showing the service sector weakening on the heels of earlier signs of a slowdown in regional manufacturing.

Special correspondent Karla Adam contributed to this report.