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| Italian prime minister Mario Monti |
Short-term rates had fallen sharply in another auction on Wednesday.
This week's auctions "went rather well and this is encouraging but we certainly do not think that the phase of financial turbulence is finished," Monti told reporters at an end-of-year news conference.
Monti also stressed that recent problems for Italy on the markets were linked to wider difficulties in Europe which required a "united, joint and convincing response" that could also boost growth.
"We believe budget discipline is essential and any mechanism that can make this discipline secure and credible is fine as long as there is a European economic policy... that also promotes growth," he said.
He said his government would start implementing liberal reforms to make Italy's economy more competitive starting in January and would look to the economic policies of Nordic countries for inspiration.
European leaders have agreed to strengthen rules and sanctions for keeping public accounts in order but there are lingering doubts about the deal and about the impact of an expected slowdown in eurozone growth in 2012.
Italy's ability to borrow on the debt markets was being closely watched as a bellwether of current confidence in the eurozone.
The euro hit its lowest level in more than a year against the dollar and 10-year lows against the yen following the auction in a new sign of concern.
Italian stocks were weighed down for much of the day, getting a boost only from positive US data and closing the session 0.76 percent higher.
Analysts were cautious about the implications of the bond sale.
"There's no reason to be over the moon. We're basically at 7.0 percent," said Rene Defossez, a bond strategist at French investment bank Natixis.
ETX Capital trade Manoj Ladwa told AFP: "We cannot rule out a bailout for Italy if the market loses patience with EU ministers' lack of action."
Alessandro Plateroti, a columnist for business daily Il Sole 24 Ore, said: "Investors see Italy is more stable on the short term thanks to reforms and austerity measures adopted by Monti but are more prudent on the long term."
Italy will have to raise some 450 billion euros on the debt markets in 2012 -- with around 53 billion euros to be raised next month alone -- and analysts say it will struggle if the high rates seen recently persist.
The eurozone's third largest economy, Italy sparked fears this year that its toxic mix of low growth, high debt and spiralling borrowing costs could force it to seek a bailout like fellow eurozone members Greece, Ireland and Portugal.
Silvio Berlusconi's replacement by Monti as prime minister last month has helped ease fears of an imminent debt implosion as the former European Union commissioner quickly put in place a tough plan of austerity measures.
But there is still concern over the plan's impact on an economy that is moving into recession after shrinking by 0.2 percent in the third quarter.
The government is forecasting a contraction of 0.4 percent next year.
There was more bad news on the economic front meanwhile with a closely watched business confidence index falling to 92.5 points in December.
Confidence fell particularly steeply for the construction and retail sectors after a Christmas season in which consumption was down compared to last year.
Italy on Wednesday raised 9.0 billion euros in six-month bonds at a rate of 3.251 percent -- half the rate of 6.504 percent that it was forced to pay in November and below the level of 3.535 percent it paid in October.
Analysts suggested that banks making use of low-cost European Central Bank money were largely behind the auction's success, along with the austerity measures adopted this month and aimed at restoring budget balance by 2013.
The ECB last week provided banks with a record 489.2 billion euros in three-year loans at an interest rate of just 1.0 percent.
While the injection was made in order to avoid a credit crunch, the low rate makes it easy for banks to make money off higher-yielding bonds.
